SEVENTH CIRCUIT REVIEW
www.kentlaw.edu/7cr Volume 4, Issue 1 Fall 2008
CONTENTS
Masthead iii About the SEVENTH CIRCUIT REVIEW iv
Antitrust
The Intra-Enterprise Conspiracy Doctrine in American Needle Inc. v. National Football League: Antitrust Law Continues Its Path Toward Rationality John O. Gunderson 1
Appellate Procedure
Just a Bunch of Fusspots and Nitpickers? Patrick D. That Pretty Much Sums It Up Austermuehle 34
Bankruptcy
Let’s Get It Straight: The Effect of Fehribach, The HA2003 Liquidating Trust, and Joyce on a Debtor’s Pre-Bankruptcy Professionals and Where to Go From Here Jamie L. Johnson 59
Civil Rights
Analyzing a Pretrial Detainee’s § 1983 Claims Under the Deliberate Indifference Standard Amounts to Punishment of the Detainee Leslie B. Elkins 91
i
Welcome to the Family: A New Class of Cognizable Claims Under the Pregnancy Discrimination Act Teresa A. Minnich 117
License to Kill (the Dream of Fair Housing): How the Seventh Circuit in Craigslist Gave Websites a Free Pass to Publish Discriminatory Housing Advertisements Joseph J. Opron III 152
Criminal Law
Policing Thought: United States v. Khattab and the Mens Rea Requirement of 21 U.S.C. § 841 Anne M. Walker 193
First Amendment
Unraveling Tinker: The Seventh Circuit Leaves Student Speech Hanging by a Thread Marcia E. Powers 215
ii SEVENTH CIRCUIT REVIEW www.kentlaw.edu/7cr Volume 4, Issue 1 Fall 2008
Chicago-Kent College of Law Illinois Institute of Technology 565 West Adams Street, Chicago, Illinois 60661
Hal R. Morris Professor
Sandra R. Stipp Executive Editor – Teaching Assistant
Editorial Staff Patrick D. Austermuehle Teresa A. Minnich Leslie B. Elkins Joseph J. Opron III John O. Gunderson Marcia E. Powers Jamie L. Johnson Anne M. Walker
© 2008 Chicago-Kent College of Law, Illinois Institute of Technology.
iii SEVENTH CIRCUIT REVIEW
www.kentlaw.edu/7cr Volume 4, Issue 1 Fall 2008
ABOUT THE SEVENTH CIRCUIT REVIEW
Purpose
The SEVENTH CIRCUIT REVIEW is a semiannual, online journal dedicated to the analysis of recent opinions published by the United States Court of Appeals for the Seventh Circuit. The SEVENTH CIRCUIT REVIEW seeks to keep the legal community abreast of developments and trends within the Seventh Circuit and their impact on contemporary jurisprudence. The articles appearing within the SEVENTH CIRCUIT REVIEW are written and edited by Chicago-Kent College of Law students enrolled in the SEVENTH CIRCUIT REVIEW Honors Seminar.
The SEVENTH CIRCUIT REVIEW Honors Seminar
In this seminar, students author, edit, and publish the SEVENTH CIRCUIT REVIEW. The REVIEW is entirely student written and edited. During each semester, students identify cases recently decided by the Seventh Circuit to be included in the REVIEW, prepare initial drafts of case comments or case notes based on in-depth analysis of the identified cases and background research, edit these drafts, prepare final, publishable articles, integrate the individual articles into the online journal, and "defend" their case analysis at a semester-end roundtable. Each seminar student is an editor of the REVIEW and responsible for extensive editing of other articles. Substantial assistance is provided by the seminar teaching assistant, who acts as the executive editor.
iv The areas of case law that will be covered in each journal issue will vary, depending on those areas of law represented in the court's recently published opinions, and may include:
• Americans with Disabilities Act • antitrust • bankruptcy • civil procedure • civil rights • constitutional law • copyright • corporations • criminal law and procedure • environmental • ERISA • employment law • evidence • immigration • insurance • products liability • public welfare • securities
This is an honors seminar. To enroll, students must meet one of the following criteria: (1) cumulative GPA in previous legal writing courses of 3.5 and class rank at the time of registration within top 50% of class, (2) recommendation of Legal Writing 1 and 2 professor and/or Legal Writing 4 professor, (3) Law Review membership, (4) Moot Court Honor Society membership, or (5) approval of the course instructor.
v SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008
THE INTRA-ENTERPRISE CONSPIRACY DOCTRINE IN AMERICAN NEEDLE INC. V. NATIONAL FOOTBALL LEAGUE: ANTITRUST LAW CONTINUES ITS PATH TOWARD RATIONALITY
∗ JOHN O. GUNDERSON
Cite as: John O. Gunderson, The Intra-Enterprise Conspiracy Doctrine in American Needle Inc. v. National Football League: Antitrust Law Continues Its Path Toward Rationality, 4 SEVENTH CIRCUIT REV. 1 (2008), at http://www.kentlaw.edu/7cr/v4- 1/gunderson.pdf.
INTRODUCTION
Thirty-two National Football League (NFL) teams battle one another each week, but each of these teams has at least one thing in common—Reebok, Inc., (“Reebok”) manufactures all of the uniforms worn during play, all of the hats and jackets worn on the sidelines, and each coach’s shirt, from Mike Holmgren’s polo shirt in Seattle to Bill Belichick’s hooded sweatshirt in New England. This is due to a trademark licensing agreement that the NFL entered into with Reebok in 2000.1 At first blush, this arrangement might seem like a clear example of one of the great potential evils in American commerce—a monopoly. Further review of the situation (and litigation) has determined that it is not. The primary goals of antitrust law are to protect American commerce from “restraints, monopolies, price-fixing, and price
∗ J.D. candidate, May 2009, Chicago-Kent College of Law, Illinois Institute of Technology; B.A. 2006, Creighton University. 1 Richard Sandomir, Reebok Strikes Exclusive Deal with N.F.L., L.A. TIMES, Dec. 20, 2000, available at http://articles.latimes.com/2000/dec/20/business/fi-2360.
1 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 discrimination”2 and to create a more efficient economy.3 Antitrust law exists to prevent companies from restraining trade through the formation of trusts,4 conspiracies,5 and monopolies.6 These words are not defined in the Sherman Act itself, but according to Merriam- Webster’s Online Dictionary, “monopoly” means “exclusive ownership through legal privilege, command of supply, or concerted action,”7 a “trust” is “a combination of firms or corporations formed by a legal agreement,”8 and “conspiracy” is the act of “join[ing] in a secret agreement to do an unlawful or wrongful act . . .”9As these definitions indicate, it is wrong to assume a Sherman Act violation at any time that there is only one competitor in a market. One example of a legal single-competitor market is the market for NFL-licensed apparel, which the Seventh Circuit Court of Appeals ruled not to be illegally monopolized by Reebok in American Needle Inc. v. National Football League.10 This article explains why the NFL’s exclusive licensing agreement with Reebok is considered legal and not a violation of the Sherman Antitrust Act. This article is divided into four parts. Part I provides a look at the origins behind and the history of antitrust legislation in the United States. Part II discusses the rise and fall of the intra-enterprise
2 th BLACK’S LAW DICTIONARY (8 ed. 2004). 3 Herbert Hovenkamp, Distributive Justice and the Antitrust Laws, 51 GEO. WASH. L. REV. 1 (1982). 4 15 U.S.C. § 1 (2000). 5 Id. 6 Id. at § 2. 7 Monopoly – Definition from Merriam-Webster Online Dictionary, http://www.merriam-webster.com/dictionary/Monopoly (last visited December 2, 2008). 8 Trust – Definition from Merriam-Webster Online Dictionary, http://www.merriam-webster.com/dictionary/Trust (last visited December 2, 2008). 9 Conspiracy – Definition from Merriam-Webster Online Dictionary, http://www.merriam-webster.com/dictionary/Conspiracy (last visited December 2, 2008). 10 American Needle Inc. v. National Football League, 538 F.3d 736 (7th Cir. 2008).
2 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 conspiracy doctrine in American antitrust jurisprudence. This doctrine provided that a parent company and its wholly-owned subsidiary could satisfy the requirements of a conspiracy that could unlawfully restrain trade under the Sherman Act. Had this doctrine not been overturned by the Supreme Court in Copperweld Corp. v. International Tube Corp., which ended forty years of existence for the intra-enterprise conspiracy doctrine, the NFL’s exclusive licensing agreement would likely not have been upheld by the Seventh Circuit. Part II also details the Copperweld decision and describes how the Copperweld decision has been expanded in the twenty-four years since the court decided Copperweld. Part III explains the facts behind American Needle Inc. v. National Football League and details the Seventh Circuit’s decision in that case. Finally, Part IV provides analysis of the Seventh Circuit’s decision and explains why the court made the right decision.
I. ANTITRUST LEGISLATION
There are five main statutory bases for federal antitrust law in the United States.11 These are the Sherman Act of 1890, the Clayton Act and the Federal Trade Commission Acts of 1914, the Robinson- Patman Act of 1936, and the Celler-Kefauver Amendments to the Clayton Act of 1950.12 This section of the article will focus on the Sherman Act, as American Needle Inc. v. National Football League does not contain any claims made under any of the other four acts.13
11 HERBERT HOVENKAMP, FEDERAL ANTITRUST POLICY: THE LAW OF COMPETITION AND ITS PRACTICE 49 (2d ed. 1999). 12 Id. at 49 n.17. The first antitrust act, the Sherman Act, is discussed further in this article. The Clayton Act and the Federal Trade Commission Act were largely aimed at deterring large businesses from engaging in “exclusionary” practices with respect to smaller businesses. Id. at 49. The Robinson-Patman Act made it unlawful to discriminate between purchasers via price if that discrimination resulted in reduced competition. Id. at 571–72. The Celler-Kefauver Amendments strengthened the Clayton Act’s anti-merger provisions. Id. at 49. 13 See American Needle, 538 F.3d 736.
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The Sherman Act was debated and passed in 1890, and at that time, most Americans lived in rural areas rather than in cities.14 Economies around the world had been very dependent on agriculture during the eighteenth century,15 and the United States was no exception.16 American farmers were very independent, often living alone on their land outside of towns and villages17 and generally only working together during the harvest.18 This fiercely independent spirit of the American farmer was understandably shocked by the Industrial Revolution during the second half of the eighteenth century.19 Rural Americans felt threatened by the economic power wielded by large firms such as railroads. These feelings were only exacerbated by the eventuality that these workers became dependent on the new, big companies to provide them with machinery needed to farm more effectively and with the transportation infrastructure to move what they produced.20 There seemed to be only two options—Americans could either live with the increasingly large corporations or rely on the government to take over the corporations.21 Neither option proved attractive because Americans were largely as skeptical of the government as they were of large corporations.22 As a result, a third option materialized, which encouraged breaking up monopolies rather than having the government assume control.23
14 LAWRENCE A. SULLIVAN & WARREN S. GRIMES, THE LAW OF ANTITRUST: AN INTEGRATED HANDBOOK 4 (2d. ed. 2006). 15 See id. 16 Id. 17 Id. 18 Id. 19 Id. 20 Id. 21 Id. 22 Id. 23 Id. at 5.
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This new wave of thinking produced the Sherman Act. The Sherman Act relies on two main provisions.24 Section 1 of the Sherman Act makes it unlawful to contract or conspire in such a way as to restrain trade.25 Section 2 of the Sherman Act goes a step farther and makes it illegal for a company to monopolize or even to attempt to monopolize.26 Section 1 and Section 2 were both written using very broad terms, which leaves the statute open to interpretation by judges.27 The broad language employed by the Sherman Act has achieved its goals. The path of the intra-enterprise conspiracy doctrine provides a perfect example of courts not only being able to interpret the Sherman Act broadly but also being able to reverse course when they deem it necessary.28
II. INTRA-ENTERPRISE CONSPIRACY DOCTRINE
There is no language in the Sherman Act that says that two companies that are affiliated may avoid antitrust liability if they combine their efforts to compete. A literal reading of the Act would likely lead a reader to conclude that this sort of conduct should be prohibited. This likelihood seems even more probable when a statute is written broadly and invites judicial discretion as the Sherman Act does. As such, there developed a line of Supreme Court cases that prohibited this sort of conduct. The intra-enterprise conspiracy doctrine was the product of Supreme Court jurisprudence that began with United States v. Yellow Cab Co. in 1947 and lasted until 1984’s Copperweld Corp. v. Independence Tube Corp. The doctrine stated that even a company and its wholly-owned subsidiary can engage in
24 15 U.S.C. §§ 1–7 (2000). 25 Id. at § 1 26 Id. at § 2 27 SULLIVAN & GRIMES, supra note 11, at 7. 28 See United States v. Yellow Cab Co., 332 U.S. 218 (1947); Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752 (1984).
5 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 conduct that triggers liability under the Sherman Act.29 The seemingly odd result of the intra-enterprise conspiracy doctrine is that two or more entities can act in such a way as to restrain trade—even though they have the same owner and are, presumably, operating toward the same ends. Though arguments against the doctrine arose to the Supreme Court rather frequently, it was consistently upheld for just under forty years.30
A. Creation of the Doctrine: United States v. Yellow Cab Co.
In 1929, various owners of taxicab companies in Chicago, New York, and other cities commenced talks with the goal of merging some of the major cab companies.31 Morris Markin was the controlling shareholder of Checker Cab Manufacturing Corporation (“CCM”), which in turn owned 62% of the stock in Parmalee Transportation Company (“Parmalee”).32 Parmalee contracted with railroads and railroad terminal associations to transport passengers and luggage between the various stations in Chicago.33 Parmalee then acquired a controlling interest in the Chicago Yellow Cab Company, Inc. (“Chicago Yellow”), which owned all of the stock of Yellow Cab Company (“Yellow”), which owned and operated all of the Yellow cabs in and around Chicago.34 The next year, in 1930, Markin incorporated Cab Sales and Parts Corporation (“Cab Sales”), which owned and operated all Checker cabs in and around Chicago with licenses held by Checker Taxi Company.35 Markin then acquired a large interest in DeLuxe Motor Cab Company—the third largest cab company in Chicago in 1929.36
29 See Yellow Cab Co., 332 U.S. 218. 30 See id.; Copperweld, 467 U.S. 752. 31 Yellow Cab, 332 U.S. at 220–221. 32 Id. at 221. 33 Id. 34 Id. 35 Id. at 221–222. 36 Id. at 222.
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Therefore, by 1930, Markin owned the three largest taxicab companies in Chicago.37 Markin also had holdings in New York, Pittsburgh, Minneapolis, and Michigan,38 therefore creating a “large, nation-wide obstacle[] in the channels of interstate trade” of the sort that the Sherman Act is designed to tackle.39 The United States sued Yellow Cab, Chicago Yellow, Parmalee, Cab Sales, Checker, CCM, and Markin, claiming violations of Sections 1 and 2 of the Sherman Act.40 Yellow Cab eventually made its way to the Supreme Court, and in Justice Murphy’s opinion, the Court held that “[t]he test of illegality under the Act is the presence or absence of an unreasonable restraint on interstate commerce.”41 The Court continued, saying “[s]uch a restraint may result as readily from a conspiracy among those who are affiliated or integrated under common ownership as from a conspiracy among those who are otherwise independent.”42 The Court held that “interrelationships of the conspirators” are unimportant in determining whether the Sherman Act applies to a particular situation.43 The Court then cited its own precedent for support of the proposition that the Sherman Act concerns itself with “substance rather than form,”44 meaning that for the purposes of the Sherman Act, what is important is that trade is restrained—it does not matter who does the restraining. The Court took a very literal interpretation of the Sherman Act and reasoned that neither who was restraining trade nor how the entities were related to one another mattered for the purposes of Sherman Act liability. As long as trade was restrained, a Sherman Act violation had occurred. Thus was born the intra-enterprise conspiracy doctrine.
37 Id. 38 Id. at 225. 39 Id. at 226. 40 Id. at 225. 41 Id. at 227. 42 Id. 43 Id. 44 Id. (citing Appalachian Coals, Inc. v. United States, 288 U.S. 344 (1933)).
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B. Affirmation of the Doctrine: Kiefer Stewart, Timken Roller Bearing, and Perma Life Mufflers
Issues regarding antitrust liability involving conduct between two related entities did not cease with the Supreme Court’s holding in Yellow Cab. Over the next thirty-seven years, the Court was given multiple opportunities to reverse course with regard to the holding in Yellow Cab.45 The Court held firm, however, and stood by the intra- enterprise conspiracy doctrine developed Yellow Cab. Interestingly, many times the Court did not take the time to revisit the rule from Yellow Cab and did little more than cite to Yellow Cab (and later to the other cases that followed its precedent) without taking a closer look as to why the rule was implemented or why it should continue to be followed.46 Justice Jackson looked critically at the doctrine in one dissenting opinion,47 but aside from this rather isolated example, the justices seemingly blindly followed Yellow Cab.
1. Kiefer Stewart Co. v. Joseph E. Seagram & Sons, Inc.
In 1950, the Court heard oral arguments in Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, Inc.48 Kiefer-Stewart was an Indiana drug concern who also engaged in a liquor wholesaling business.49 Seagram and a company called Calvert were affiliated companies that sold liquor to Indiana wholesalers.50 Kiefer-Stewart sued, arguing that Seagram and Calvert had conspired to fix the prices at which they would sell liquor to Indiana wholesalers.51 Among the defenses raised
45 See, e.g., Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, Inc., 340 U.S. 211 (1951); Timken Roller Bearing Co. v. United States, 341 U.S. 593 (1951); Perma Life Mufflers, Inc. v. International Parts Corp., 392 U.S. 134 (1968). 46 See, e.g. Kiefer-Stewart Co., 340 U.S. at 215; Timken Roller Bearing Co., 341 U.S. at 599; Perma Life Mufflers, Inc., 392 U.S. at 141–142. 47 See Timken Roller Bearing Co. 341 U.S. at 606–608 (Jackson, J, dissenting). 48 Kiefer Stewart Co., 340 U.S. 211. 49 Id. at 212. 50 Id. 51 Id.
8 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 by Seagram and Calvert was the argument that because the two were affiliated companies, they were unable to violate the Sherman Act because they were actually one company and unable to conspire.52 The Court cited Yellow Cab in declaring that common ownership does not “liberate corporations from the impact of the antitrust laws.”53 With this holding, the intra-enterprise conspiracy doctrine lived on among Supreme Court jurisprudence.
2. Timken Roller Bearing v. United States
Another example of the intra-enterprise conspiracy doctrine came a few years later in 1951 in Timken Roller Bearing Co. v. United States.54 In Timken Roller Bearing, the United States brought a civil action against Timken Roller Bearing Company (Timken) for allegedly violating Section 1 of the Sherman Act.55 The case involved agreements made as far back as 1909, in which Timken made agreements with foreign companies to divide the world into territories to which the entities would provide antifriction bearings.56 The agreements were made between 1909 and 1927, at which point Timken acquired a significant portion of British Timken, Ltd. (“British Timken”), which entered into the territorial agreements with Timken.57 In 1928, Timken was involved in organizing Societe Anonyme Francaise Timken, a French company that also provided antifriction bearings.58 The group then entered into agreements to “(1) allocate[] trade territories among themselves; (2) fix[] prices. . .; (3) cooperate[] to protect each other’s markets. . .; and (4) participate[] in cartels to restrict imports to, and exports from, the United States.”59
52 See id. at 215. 53 Id. 54 Timken Roller Bearing Co. v. United States, 341 U.S. 593 (1951). 55 Id. 56 Id. at 595. 57 Id. 58 Id. 59 Id. at 596.
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Among its arguments attempting to show that the court should not have held that it restricted trade according to the Sherman Act, Timken argued that the arrangement was a joint venture, which it argued should exempt it from culpability under the Sherman Act.60 The Court disagreed with this argument and cited to Kiefer-Stewart for the proposition that “[t]he fact that there is common ownership or control of the contracting corporations does not liberate them from the impact of the antitrust laws.”61 Timken Roller Bearing is significant, however, because it can be argued that this case is where chinks in the armor of the intra- enterprise conspiracy doctrine begin to appear. Though possibly only intended for companies affiliated across national borders, Justice Jackson provided a powerful dissent, in which he argued that preventing American companies from creating foreign subsidiaries (even if each only served a particular geographical area) may prevent American companies from expanding into foreign markets.62 Jackson went on to argue that there must be two entities in order to conspire because “a corporation cannot compete with itself.”63 Jackson pointed out that in cases in which the Yellow Cab rule was applied, what would be legal for one company to do on its own became illegal when done by two legally separate entities.64 According to Justice Jackson, “that result places too much weight on labels”65 and “[the] decision [would] restrain more trade than it [would] make free.”66
3. Perma Life Mufflers, Inc. v. International Parts Corp.
Though Justice Jackson voiced his disagreement with the intra- enterprise conspiracy doctrine in Timken Roller Bearing, the Court
60 Id. at 597. 61 Id. at 598. 62 Id. at 606 (Jackson, J. dissenting). 63 Id. 64 Id. 65 Id. at 607. 66 Id. at 608.
10 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 was not precluded from upholding the intra-enterprise conspiracy doctrine seventeen years later when the Court heard oral arguments in Perma Life Mufflers, Inc. v. International Parts Corp.67 Perma Life Mufflers is a notable case for two main reasons. First, the majority’s opinion demonstrates that any potential movement toward overturning Yellow Cab and abolishing the intra-enterprise conspiracy doctrine that may have begun with Justice Jackson’s dissenting opinion in Timken Roller Bearing had been quashed.68 Second, Perma Life Mufflers is important because it shows that after over twenty years, the Yellow Cab decision still held strongly, as none of the Nine disagreed with its application in Perma Life Mufflers.69 Perma Life Mufflers involved a set of facts similar to all of the other cases of its ilk.70 In Perma Life Mufflers, a group of plaintiffs all operated muffler shops under the name “Midas Muffler Shops” pursuant to agreements entered into with Midas, Inc.71 The plaintiffs sued, claiming that Midas had conspired with, among others,72 its parent corporation, International Parts Corp. such that the parties had violated Section 1 of the Sherman Act.73 International Parts Corp. argued that because the defendants were all part of a single business entity, they were legally allowed to act in concert as they had.74 The Court stood firm in again reaffirming the intra-enterprise conspiracy doctrine as it held “the fact of common ownership could not save them from any of the obligations that the law imposes on separate entities.”75 Despite being asked again how a corporation can
67 Perma Life Mufflers, Inc. v. International Parts Corp., 392 U.S. 134 (1968). 68 Id. 69 Id. 70 See id. 71 Id. at 135. 72 The plaintiffs also alleged that Midas, Inc. had conspired with two other subsidiaries of International Parts Corp. and six individual defendants. Id. These defendants are irrelevant to the analysis of the case under the intra-enterprise conspiracy doctrine. 73 Id. 74 Id. at 141. 75 Id. at 141–142.
11 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 essentially collude with itself, the Court continued its bizarre line of jurisprudence that made it unlawful to do so even if the entities conspiring are held under common ownership. Perma Life Mufflers is also very important for a second reason. Any movement toward a reversal of the Court’s jurisprudence with regard to the intra-enterprise conspiracy doctrine that began with Justice Jackson’s dissenting opinion in Timken Roller Bearing was halted, as none of the justices who wrote opinions76 in Perma Life Mufflers even mentioned Justice Jackson’s dissent.77 Seventeen years had passed since Timken Roller Bearing had been decided, and Jackson had only been on the bench for three of those years. It seems apparent that his viewpoint questioning the rationale behind the intra- enterprise conspiracy doctrine had failed to gain any traction, and if the doctrine were going to be overturned, the doctrine’s detractors would have to wait.
C. Turning Point: Copperweld Corp. v. Independence Tube Corp.
The Supreme Court, led by Chief Justice Berger, elected to change course with regard to the intra-enterprise conspiracy doctrine with its 1984 decision in Copperweld Corp. v. Independence Tube Corp.78 Between 1955 and 1968, the predecessor to Regal Tube Co. (Regal) was located in Chicago and was a wholly owned subsidiary of C.E. Robinson Co.79 In 1968, Lear Sigler, Inc. (Lear) purchased Regal and used it as an unincorporated division of Lear.80 In 1972, Regal was sold to Copperweld Corp. (Copperweld).81 The sale agreement
76 There were four separate opinions written in Perma Life Mufflers by Justices Black (majority), White (concurring), Marshall (concurring), Fortas (concurring in the result), and Harlan and Stewart (dissenting). It is noteworthy that by the time that Perma Life Mufflers was heard, Justice Jackson had been off of the bench for nearly fourteen years. 77 See id. 78 Copperweld Corp. v. Independence Tube Corp. 467 U.S. 752 (1984). 79 Id. at 756. 80 Id. 81 Id.
12 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 contained a five-year noncompetition clause that bound Lear and its subsidiaries not to compete with Regal in the United States.82 David Grohne was one of Lear’s corporate officers and had previously served as vice president and general manager of Regal before Lear’s acquisition of Regal.83 Grohne had acted as president of Regal after it became a division of Lear after the acquisition.84 Soon after Regal was sold to Copperweld, David Grohne sought to establish himself in the steel tubing market against his former employer, Regal, and he established Independence Tube Corp. (Independence).85 Independence contracted with Yoder Co. (Yoder) to supply a tubing mill by the end of 1973.86 Regal and Copperweld discovered Grohne’s plans and sent a letter to Yoder that said that Copperweld would take “any and all steps which are necessary to protect [the] rights under [the] purchase agreement and to protect the know-how, trade secrets, etc., which [Copperweld] purchased from Lear Sigler.”87 Yoder then voided its acceptance to provide Grohne with a tubing mill, which caused Grohne to find another company to provide him with a mill and delayed his entry into the steel tube market for almost nine months.88 In 1976, Independence sued Copperweld, Regal, and Yoder under Section 1 of the Sherman Act.89 The jury returned a verdict saying, among other things, that Regal and Copperweld had conspired to violate Section 1 of the Sherman Act, but, interestingly, that Yoder had not been a part of the conspiracy.90 The Seventh Circuit affirmed the District Court’s decision, noting that Yoder’s exoneration had left a parent corporation (Copperweld)
82 Id. 83 Id. 84 Id. 85 Id. 86 Id. 87 Id. at 757. 88 Id. 89 See id. at 758. 90 Id.
13 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 and its wholly owned subsidiary (Regal) as the only entities involved in the Section 1 conspiracy.91 The Seventh Circuit questioned this result, noting that conduct similar to the facts of Copperweld would not give rise to a cause of action if the two parties were a parent corporation and an unincorporated division of the parent.92 Ultimately, however, the Seventh Circuit affirmed the decision on the basis that liability ensues “when there is enough separation between the two entities to make treating them as two independent actors sensible.”93 The Supreme Court granted certiorari and reversed the decision.94 The Court examined the cases that provided the foundation for the intra-enterprise conspiracy doctrine and found other grounds that the past Courts could have used to decide Yellow Cab and Kiefer-Stewart in the same way in which they had already decided95 and that cases that followed those two seminal cases do nothing more than cite Yellow Cab or Kiefer-Stewart also could have relied upon other bases96 unrelated to the intra-enterprise conspiracy doctrine. The Seventh Circuit was not alone in acknowledging the strange conclusion that a parent company was capable of conspiring with its wholly owned subsidiary to restrict trade—Copperweld and Regal were joined by the United States as amicus curiae in asking the Court to overturn Yellow Cab.97 According to the Court, the chief criticism of the intra-enterprise conspiracy doctrine was that too much weight is
91 Id. 92 Id. at 758–59. 93 Id. at 759 (quoting Independence Tube Corp. v. Copperweld Corp., 691 F.2d 310, 318 (7th Cir. 1982), rev’d, 467 U.S. 752 (1984)). 94 Id. 95 Id. at 761 (stating that Yellow Cab was distinguishable based on the fact that the acquisitions were themselves illegal); id. at 764 (stating that Kiefer-Stewart was distinguishable based on the fact that subsidiaries conspired with wholesalers other than the plaintiff). 96 Id. at 765 (stating that in Timken Roller Bearing, the defendant neither owned a majority interest in nor controlled either of the conspirators); id. at 766 (stating that Perma Life Mufflers could be decided on the same grounds as Kiefer- Stewart). 97 Id.
14 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 given to the fact that a subsidiary is separately incorporated, causing the activity of one entity to be treated as the concerted activity of two separate entities.98 In other words, a parent corporation could act in concert with a wholly-owned division of itself as long as that division was not itself separately established as a corporation. The Court went further, noting that Congress only intended the Sherman Act to be used on a single firm when that firm threatens monopolization99 and that Section 1 of the Sherman Act is not intended to apply to activity that is “wholly unilateral.”100 The Supreme Court also noted that “internal agreements” of companies do not arouse Sherman Act suspicion because (1) a single firm’s officers do not pursue separate economic interests, so they “do not suddenly bring together economic power that was previously pursuing divergent goals”;101 (2) internal coordination just as likely results from efforts to compete as from efforts to “stifle competition”;102 and (3) coordination may be required for a business to compete properly.103 Furthermore, the Court noted its own precedent that if a subsidiary is an unincorporated division, then cooperation between it and its parent cannot violate section 1 of the Sherman Act.104 The Court also pointed out that a parent and its wholly owned subsidiary have “a complete unity of interest”105 in the same way that a parent company and an unincorporated division do. The Court analogized that single entities, like Copperweld and Regal, are “not unlike a multiple team of horses drawing a vehicle under the control of a single driver.”106
98 Id. 99 Id. at 768; see also 15 U.S.C. § 2 (2000). 100 Id. at 768 (quoting Albrecht v. Herald Co., 390 U.S. 145, 149 (1968)). See also 15 U.S.C. § 1 (2000). 101 Id. at 769. 102 Id. 103 Id. 104 Id. at 770. 105 Id. at 771. 106 Id.
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D. Extension of Copperweld
The decision in Copperweld signaled not only a large shift in Supreme Court jurisprudence by reversing a precedent adhered to for almost forty years, but also, in time, changed what arguments could be credibly made in front of courts with respect to single-entity issues in antitrust. In the years since the Copperweld decision, the “single-entity concept” has been extended far beyond its origins in which only a parent and its wholly-owned subsidiary could be declared a single entity.107 Now, even affiliated companies or individuals can also be considered a single-entity with respect to the Sherman Act, depending on the circumstances of the individual case.108 This extension of the Copperweld holding is the basis for the Seventh Circuit’s holding in favor of the National Football League, its member teams, NFL Properties, and Reebok with respect to the League’s decision to award an exclusive licensing contract with respect to headwear. This broadening of the Copperweld rule has been accomplished incrementally through a number of cases,109 but this article will only examine two other sports-related cases to demonstrate courts’ approaches to extending Copperweld: Chicago Professional Sports Limited Partnership v. National Basketball Association (Bulls II) and Brown v. Pro Football, Inc.110 The controversy in Bulls II arose as a result of the Chicago Bulls’ desire to broadcast more of their games on WGN, a “superstation” based in Chicago that broadcasts nationwide to cable television subscribers.111 During the case, the National Basketball Association (NBA) argued that the league should be treated as a single entity with
107 See id. 108 See Chicago Professional Sports Limited Partnership v. National Basketball Association (Bulls II), 95 F.3d 593 (7th Cir. 2006). 109 See, e.g. Jack Russell Terrier Network v. American Kennel Club, Inc., 407 F.3d 1027 (9th Cir. 2004); City of Mount Pleasant, Iowa v. Associated Electric Cooperative, 838 F.2d 268 (8th Cir. 1988). 110 Bulls II, 95 F.3d 593; Brown v. Pro Football, Inc., 518 U.S. 231 (1996). 111 Bulls II, 95 F.3d at 595.
16 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 respect to granting rights to televise its games.112 The Seventh Circuit pointed out in its Bulls II decision that the NBA’s argument requires a decision to either treat the league as a single firm, thereby only applying Section 2 of the Sherman Act, or to treat the league as a joint venture, which would possibly invoke liability under Section 1 of the Sherman Act.113 Ultimately, the Seventh Circuit did not answer this question, though the court did point out that courts have come to both conclusions.114 Perhaps the most important statement that the Seventh Circuit made in Bulls II was when the court proclaimed sports to be “sufficiently diverse that it is essential to investigate their organization and ask Copperweld’s functional question one league at a time—and perhaps one facet of a league at a time.”115 The court also stated that a league may qualify as both a single entity and a joint venture at the same time, albeit for purposes of antitrust analysis of different aspects of the league.116 With this said, it is instructive to look another NFL case, Brown v. Pro Football, Inc. Brown is slightly different from the other cases analyzed in this article. While that case does not directly implicate either the upholding or the reversal of the intra-enterprise conspiracy doctrine, the Supreme Court did analyze whether the league constituted a single employer or multiple employers for collective bargaining purposes.117 The Court had difficulty deciding how to characterize the league and ultimately
112 Id. at 596. 113 Id. at 599. 114 See id. (“Most courts that have asked whether professional sports leagues should be treated like single firms or like joint ventures have preferred the joint venture characterization.” (citing Sullivan v. NFL, 34 F.3d 1091 (1st Cir. 1994); North American Soccer League v. NFL, 670 F.2d 1249 (2d Cir. 1982); Smith v. Pro Football, Inc. 593 F.2d 1173, 1179 (D.C. Cir. 1978))); but see Bulls II, 95 F.3d at 599 (noting that Justice Rehnquist filed a strong dissent in NFL v. North American Soccer League and noting also that the Fourth Circuit has concluded that the Professional Golf Association should be treated as one firm for antitrust purposes). 115 Id. at 600. 116 Id. 117 See Brown, 518 U.S. 231.
17 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 held that the league can be considered a “single bargaining employer” with respect to hiring and paying practice squad players.118 In Bulls II, Judge Easterbrook noted that despite the fact that the NFL is “‘more like a single bargaining employer’ than a multi-employer unit is not to say that it necessarily is one, for every purpose.”119 Having explained the basic origins of antitrust law in the United States and the rise and fall of the intra-enterprise conspiracy doctrine, it is now instructive to apply these concepts to the case at the core of this article, American Needle, Inc. v. National Football League.
III. AMERICAN NEEDLE INC. V. NATIONAL FOOTBALL LEAGUE
The National Football League (NFL) has been in existence for almost ninety years,120 and during its existence, the league has become wildly successful by almost any measure, including attendance,121 television revenue,122 players’ salaries,123 and franchise values.124 The
118 A practice squad player is a player who practices with the team and can be used to supplement the team’s roster should one of the team’s regular players become unavailable due to injury or for some other reason. 119 Bulls II, 95 F.3d at 599. 120 American Needle, Inc. v. National Football League, 538 F.3d 736, 737 (7th Cir. 2008). 121 In 2007, the NFL set a new paid attendance record with a total attendance of 22,256,502 including all 333 preseason, regular-season, and postseason games. This works out to an average attendance of 66,836. NFL Sets Attendance Record in 2007, available at http://www.nfl.com/news/story?id=09000d5d8077f84d&template=without- video&confirm=true (last visited November 12, 2008). 122 Fox pays $4.3 billion to televise NFC games; CBS pays $3.7 billion to televise AFC games. These contracts are for the 2006–2011 seasons and include only Sunday afternoon games. The NFL also has a contract with DirecTV that includes the 2006–2010 seasons for the satellite provider’s NFL Sunday Ticket package. Late Season Games can be Moved to Sunday Nights, available at http://sports.espn.go.com/nfl/news/story?id=1918761 (last visited November 12, 2008). In addition to these contracts, the NFL has a contract to televise Monday night during the 2006–2013 seasons for $1.1 billion per year. Steve Kroner, Monday Night Football to leave ABC for ESPN, S.F. CHRON., April 19, 2005, at A-1. The league also has a six-year contract worth $3.6 billion with NBC to televise Sunday
18 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 right to produce and market officially-licensed league apparel is the basis of the lawsuit brought against the league, its member teams, NFL Properties LLC (collectively, “the NFL defendants”) and Reebok International Ltd. (Reebok) by American Needle Inc. (American Needle).125 The NFL is an unincorporated association of thirty-two individually owned and operated franchises around the United States.126 The NFL’s member teams play over 250 games in a given season, and it is these games that serve as the league’s product.127 The Seventh Circuit notes that although each team is an individual unit by itself, no team can produce the league’s product—the games— alone.128 In this way, all of the league’s teams are inextricably bound together, and each team’s individual success is linked to the success of all of the others.129 In other words, “it makes little difference if a team wins the Super Bowl if no one cares about the Super Bowl.”130 As
night games. Joanna Weiss, NBC: Sunday Night’s Alright for Football, available at http://www.boston.com/ae/tv/articles/2006/07/24/ nbc_sunday_nights_all_right_for_football/ (last visited November 12, 2008). 123 NFL payrolls for 2008 range between $83.6 million (Kansas City) and $152.4 million (Oakland). Pittsburgh’s Ben Roethlisberger is the league’s highest paid player, earning $27.7 million between his salary ($2.5 million) and signing bonus ($25.2 million). Larry Weissman, NFL Salaries ’08: Big Ben Smiling as Highest-Paid Player, USA TODAY, available at http://www.usatoday.com/sports/football/nfl/2008-11-05-salaries_N.htm (last visited November 12, 2008). 124 In 2008, Forbes Magazine found that the average NFL franchise is worth over $1 billion. The league’s most valuable franchise is the Dallas Cowboys, which Forbes estimates is worth $1.612 billion. Press Release, Forbes, Forbes Announces 2008 NFL Franchise Valuations: League Average $1 Billion For The First Time In Any Professional Sport (Sept. 10, 2008) (on file with author). 125 American Needle, Inc. v. National Football League, 538 F.3d 736 (7th Cir. 2008). 126 Id. at 737. 127 Id. 128 Id. 129 Id. 130 Id.
19 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 such, the NFL sought to promote the trademarks of its member teams and the league itself as a collective whole with the intention of competing against other forms of entertainment rather than against one another.131 As a result of this intention to compete against other forms of entertainment, the NFL teams created NFL Properties (Properties) in 1963.132 Properties is given the dual responsibilities of both “developing, licensing, and marketing the intellectual property the teams own[], such as their logos, trademarks, and other indicia” and “conduct[ing] and engag[ing] in advertising campaigns and promotional ventures on behalf of the NFL and [its] member [teams].”133 Properties was given the power to issue licenses to manufacturers of different types of team merchandise and apparel, including flags, shirts, jerseys, and hats.134 The last of these, the right to produce league-licensed hats, gave rise to American Needle Inc. v. National Football League.135 American Needle (American Needle) owned a license to manufacture NFL headwear for over twenty years.136 During this time, Properties allowed multiple companies to hold headwear licenses at any given time,137 but Properties changed its policy in 2000 and elected to continue on with an exclusive headwear license.138 Reebok was the highest bidder, was granted the license, and became the NFL’s exclusive provider of headwear as of 2001.139 Reebok’s exclusive license will not expire until 2011.140
131 Id. 132 Id. 133 Id. 134 Id. 135 See id. 136 Id. at 738. 137 Id. 138 Id. 139 Id. 140 Id.
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Upon losing its license, American Needle filed suit in the United States District Court for the Northern District of Illinois.141 American Needle made two separate arguments. First, it argued that the exclusive apparel license granted to Reebok violated Section 1 of the Sherman Act, because each individual franchise owns its own team logos and trademarks.142 So, when the teams charged Properties with awarding an exclusive apparel license and Properties granted that license to Reebok, the result was an illegal conspiracy “restrict[ing] other vendors’ ability to obtain licenses for the teams’ intellectual property.143 Second, American Needle argued that an unlawful monopoly was created when Properties granted Reebok its exclusive headwear license.144 According to American Needle, this monopoly was created in the specialized market of NFL team licensing and product wholesale.145 The NFL defendants moved for summary judgment with regard to American Needle’s Section 1 claim, citing the Supreme Court’s holding in Copperweld Corp. v. Independence Tube Corp.146 The NFL defendants relied on the gradual extension of the rule laid down in Copperweld—affiliated companies can be considered a single entity in certain circumstances and therefore cannot violate Section 1 of the Sherman Act in those circumstances.147 The NFL defendants argued that they should be considered a single entity when promoting the league through the licensing of their respective intellectual property.148 Rather than file a brief in response to the NFL defendants’ motion, American Needle filed a motion for a continuance under Federal Rule
141 American Needle, Inc. v. New Orleans Lousiana Saints, 496 F.Supp.2d 941 (N.D. Ill. 2007). 142 American Needle, 538 F.3d at 738. 143 Id. 144 Id. 145 Id. 146 Id. 147 Id. 148 Id.
21 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 of Civil Procedure Rule 56(f),149 requested an opportunity to take discovery on the issue of the NFL defendants’ single-entity defense, and listed fifty-one discovery requests.150 Following a struggle regarding what evidence needed to be turned over to American Needle,151 the district court denied the Rule 56(f) motion and granted the NFL defendants’ motion for summary judgment regarding American Needle’s Section 1 claim. The district court’s ruling on the NFL defendants’ summary judgment motion was largely based on the fact that Properties was established in order to “promote NFL football” through collective licensing.152 The court concluded that these efforts to promote the league as a whole through collective-licensing demonstrates that the league and its member teams “act[] as an economic unit” and therefore “should be deemed to be a single entity.”153 The court used this analysis to find that the NFL defendants, as a single entity, are unable
149 Federal Rule of Civil Procedure 56(f) provides, “[if] a party opposing . . . cannot . . . present by affidavit facts essential to justify the party’s opposition, the court may . . . order a continuance to permit affidavits to be obtained or depositions to be taken or discovery to be had. . .” FED. R. CIV. P. 54(f). In essence, the rule allows the non-moving party to argue to the court that it is unable to respond without receiving more discovery materials from the moving party. Id. 150 American Needle, 538 F.3d at 739. 151 The NFL defendants objected to American Needle’s requests, arguing that they were not limited to the defense that they had proffered. The NFL defendants did ultimately offer a number of documents, and the court encouraged American Needle to reduce the number of documents that it had requested while it reserved judgment with regard to the objection that the NFL defendants raised. American Needle then made yet more requests, causing the NFL defendants to again object. With this further request and objection, the district court entered an order limiting discovery to the NFL defendants’ single-entity defense and ordered the NFL defendants to produce all documents with respect to that issue. The NFL defendants complied; American Needle filed another motion under Rule 56(f) and made forty-nine more requests, many of them the same requests made earlier. The court then took this motion under advisement and compelled American Needle to respond to the motion for summary judgment. Id. 152 Id. 153 Id.
22 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 to violate Section 1 of the Sherman Act.154 As a result of this collective action, American Needle’s claim failed as a matter of law. Following its decision on American Needle’s Section 1 claim, the court requested that the two sides file briefs regarding American Needle’s other claim—that the NFL defendants had created an illegal monopoly under Section 2 of the Sherman Act.155 Upon receipt of the briefs, the court came to the conclusion that its finding with regard to American Needle’s Section 1 claim also caused the Section 2 claim to fail, because single entities, such as the NFL and its teams, can license their collective intellectual property to any number of licensees without breaking antitrust laws.156 American Needle appealed the district court’s decision to the Seventh Circuit on two separate grounds: (1) the district court improperly denied its Rule 56(f) motion prior to granting summary judgment, and (2) the district court incorrectly granted the NFL defendants’ motion for summary judgment on both its Section 1 claim and its Section 2 claim.157 The Seventh Circuit applied an abuse of discretion standard of review to American Needle’s first argument158 and a de novo standard to its second.159 When an abuse of discretion standard of review is used, the appellate court must defer to the lower court’s findings unless the appellate court finds that the lower court exercised too much discretion in coming to its findings. De novo review means that the appellate court can look at the entire record from the lower court and can come to its own independent finding if necessary. Pursuant to these standards of error, the Seventh Circuit affirmed both of the district court’s findings.160 With regard to its argument that the district court improperly denied its Rule 56(f) motion, American Needle claimed that the
154 Id. 155 Id. at 740. 156 Id. 157 Id. 158 Id. 159 Id. at 741. 160 Id. at 744.
23 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 district court allowed the NFL defendants to “control the flow of information” by refusing to order the NFL defendants to turn over documents that American Needle requested.161 American Needle further claimed that the district court failed to adequately explain its decision.162 The Seventh Circuit disagreed, saying that the court adequately explained itself and, thereby, did not abuse its discretion.163 The Seventh Circuit pointed out that in order for American Needle’s motion to succeed, there needed to be some specific evidence that American Needle could have obtained that would have created a question of liability.164 In other words, a party cannot simply “go fishing” and expect the other side to be ordered to turn over any evidence in its possession that goes against its argument. American Needle argued that a single entity finding is “fact intensive,” but this alone cannot require the NFL defendants to turn over any additional evidence, because just because something is “fact intensive” does not mean that the required facts are not included in what has already been turned over.165 The Seventh Circuit also denied American Needle’s second argument, finding that the district court properly granted summary judgment in favor of the NFL defendants.166 American Needle contended that the district court erred in concluding that the NFL defendants constitute a single entity under the rule from Copperweld, and so were capable of violating Section 1.167 The Seventh Circuit admitted that this is a question that does not have a readily-identifiable answer, and the court pointed out that in some instances, the single- entity formulation seems apt, while in others, a professional sports league is more properly described as a joint venture among a
161 Id. at 740. 162 Id. 163 Id. 164 Id. 165 Id. at 741. 166 Id. at 744. 167 Id. at 741.
24 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 collection of independently-owned teams.168 The court cites to Bulls II in pointing out that the league is a “single source” for purposes of entertainment and that the teams produce “one product”—the league’s games.169 However, the court also cites to Brown v. Pro Football, Inc. in pointing out that when a person seeks employment in such a league, the teams act as separate entities that each have the ability to hire and fire their own employees.170
IV. ANALYSIS
The Seventh Circuit made a well-informed and considered decision in American Needle v. National Football League. In past cases, the idea of single-entity treatment for sports leagues has been considered, but it has not been accepted with respect to all questions and all aspects of the league.171 This represents a judicial minimalist viewpoint toward single-entity treatment, and courts should continue to follow this model, despite compelling arguments to treat sports leagues in other ways, such as joint ventures172 or even treating the individual franchises as separate, individual entities. The Seventh Circuit wisely elected to follow the path begun by more recent intra-enterprise conspiracy doctrine cases and decided only what it had to in order to resolve this particular case. The effect was that the court neither over- nor under-reached while making its calculated decision in American Needle. Though the Seventh Circuit’s decision neither has a large direct impact on existing law nor created any new precedent to be followed by other courts, the decision in American Needle is important because it shows antitrust law’s continued evolution away from the seemingly incongruous results created by the intra-enterprise conspiracy doctrine.
168 Id. 169 Id. 170 Id. 171 See Chicago Professional Sports Limited Partnership v. National Basketball Association (Bulls II), 95 F.3d 593 (7th Cir. 2006). 172 See id at 601–06 (Cudahy, Circuit Judge, concurring).
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A. Courts Should Use Incremental Advancement of Single-Entity Status in Antitrust Cases
Judicial minimalism is the idea that each case that comes in front of a court presents its own facts and its own unique questions and these questions should be answered with respect to that particular case’s facts.173 In other words, judicial minimalists hold that court decisions should not contain broad statements of law, but rather that each case should be decided individually and that law should move and evolve slowly and incrementally. To this point in time, the single entity concept has moved in this way—Copperweld began the movement by allowing a parent and its wholly-owned subsidiary to be treated as a single actor with respect to questions arising under the Sherman Act;174 Bulls II advances the idea that the National Basketball Association (NBA) could be treated as a single entity with respect to creating television contracts;175 Mt. Pleasant v. Associated Electric Co. involves an electric cooperative that was treated as a single firm;176 and even the Professional Golf Association (a collection of individual players) has been treated as a single entity.177 A judicial minimalist approach to the single-entity concept will help protect against potentially unforeseen problems that can accompany unwarranted expansion of the law. For instance, the Seventh Circuit’s holding in American Needle and the Supreme Court’s holding in Brown v. Pro Football, Inc. demonstrate that even one league can raise questions that would be answered in different ways. In American Needle, the Seventh Circuit held that the league and its teams should be considered one entity with respect to
173 See Christopher J. Peters, Assessing the New Judicial Minimalism, 100 COLUM. L. REV. 1454, 1455 (2000). 174 Copperweld Corp. v. Independence Tube Corp. 467 U.S. 752 (1984). 175 See Bulls II, 95 F.3d 593. 176 See Mt. Pleasant v. Associate Electric Cooperative, 838 F.2d 268 (8th Cir. 1988). 177 See Seabury Management, Inc. v. Professional Golfers’ Ass’n of America, 878 F. Supp. 771 (D. Md. 1994).
26 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 trademark licensing.178 However, in Brown, the Supreme Court noted that players coming into the league would see each team as an individual employer with the ability to hire and fire employees and sign and cut players.179 Had American Needle been decided before Brown, and had the Seventh Circuit made a broad pronouncement that the NFL and its teams are to be treated as a single entity, the issues in Brown likely would never have been raised and considered on their own merits. The court would not have been given the opportunity to decide the case in the way in which it did, because the court would not have had the discretion to be selective regarding when to treat a professional sports league as a single entity and when to treat it as a collection of individual entities. On the other hand, allowing courts to use their discretion to treat the league as a single entity in some cases and as separate entities in others could conceivably create confusion. Additionally, this discretion will create a situation in which courts often will not be able to rely on precedent because an independent inquiry would have to be conducted regarding each aspect of an entity. This inability to rely on precedent threatens to further burden an already busy judiciary that could benefit from a reduction in appeals and an increase in settlements. Despite this drawback, however, courts should continue to follow this path, because the league does not always act as either a single entity or a collection of separate entities at all times. This approach, while potentially inconsistent, is likely to produce the fairest results.
178 American Needle, Inc. v. National Football League, 538 F.3d 736 (7th Cir. 2008). 179 Id. at 741 (citing Brown v. Pro Football, Inc., 518 U.S. 231, 248–249 (1996)).
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B. The NFL Should Be Considered a Single-Entity With Respect to Intellectual Property Licensing for Apparel
The Seventh Circuit made the right conclusions while analyzing the NFL defendants’ argument that they should be treated as a single entity with respect to potential violations under the Sherman Act in American Needle v. National Football League. There are three reasons why the court made the right holding: (1) the NFL and its co- defendants made a compelling argument that they produce one product, namely “NFL football;”180 (2) the NFL’s history indicates that it created Properties for the purpose of marketing and promoting the league and its product as a whole;181 and (3) the pertinent market in American Needle should be drawn more broadly and encompass more than simply “NFL apparel.”
1. “NFL Football”: A Unique Product
The Seventh Circuit held that the NFL and its member teams create a single product that can be identified as “NFL football.”182 The Seventh Circuit cites to several sources of very persuasive authority in holding that NFL football constitutes a unique product that is produced by the thirty-two NFL franchises and the league itself. The Seventh Circuit points to a Supreme Court decision in which the Court quotes Robert Bork’s book, The Antitrust Paradox, in which Bork creates a hypothetical professional lacrosse league and points out that it would be fruitless for the league to be held as violating the Sherman Act because there are no other leagues.183 The Seventh Circuit also cites to itself in the Bulls II decision in which it argues that “the NBA has no existence independent of sports. It makes professional basketball; only
180 Id. at 743. 181 Id. at 737. 182 Id. at 743. 183 Id. (citing National Collegiate Athletic Association v. Board of Regents, 468 U.S. 85, 101 (quoting ROBERT BORK, THE ANTITRUST PARADOX 278 (1978))). Note: Bork’s book was written before there was a professional lacrosse league in the United States.
28 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 it can make ‘NBA Basketball’ games . . . .”184 This point about the NBA is a valid one, as NCAA basketball is a popular sport in its own right, and provides a unique experience when compared to the NBA.185 In much the same way, NFL Football is a product that is distinct from NCAA football. For example, NCAA football is generally played on Saturdays as opposed to Sundays, has its own unique championship system distinct from the NFL’s,186 and has separate television contracts,187 among other differences. Granted, NFL Football and college football are not exactly analogous, because the NFL features professional athletes, while (at least in theory) NCAA football features amateurs.188 Perhaps the most convincing argument that NFL Football is a unique product is that two rival professional football leagues, the United States Football League (USFL)189 and the XFL190 have been created in the past thirty years and the fact that neither remains in existence today demonstrates that neither served as a viable alternative to the NFL. Even leagues that were created without the intention of being a direct competitor to the NFL have failed. For example, in 1990, the World League of American Football (WLAF) was formed with the
184 Id. (quoting Chicago Professional Sports Limited Partnership v. National Basketball Association (Bulls II), 95 F.3d 593, 599 (7th Cir. 2006)). 185 CBS signed a contract extension with the NCAA in 1999 to pay $6 billion for the rights to televise the NCAA basketball tournament. CBS Renews NCAA B’Ball, CNN MONEY, Nov. 18, 1999, http://money.cnn.com/1999/11/18/news/ncaa/ (last visited November 12, 2008). 186 Bowl Championship Series, http://www.bcsfootball.org (last visited November 12, 2008). 187 See Notre Dame agrees to five-year extension with NBC, ESPN, June 19, 2008, http://sports.espn.go.com/ncf/news/story?id=3452161 (last visited November 12, 2008). 188 NCAA Operating Bylaw Art.12.01.1 (2008). 189 See The History of the USFL 1982–1986, http://www.remembertheusfl.8m.com/history.html (last visited November 12, 2008). 190 See C.W. Nevius, Extinct: NBC, WWF pull the plug on XFL after just one season of anything-goes football, S.F. CHRON., May 11, 2001, at A-1.
29 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 support of the NFL191 and lasted only two seasons.192 Two years went by before the league was resumed under the name “World League,” and some form of the revamped league continued on until 2007, when the league was disbanded.193 Even since the league went under in 2007, the NFL has continued to play a regular season game each season in London,194 from which one can infer that the failure of the league was not due to the fact that it was football being played, but rather that it was not NFL Football being played. That NFL Football is a unique entertainment product justifies its treatment as a single entity in American Needle. The argument can be made that if the league were not treated as a single entity in some respects, it would be at a severe disadvantage when competing against other types of entertainment, such as network and cable television, the motion picture industry, and even popular vacation destinations, such as Disneyland. All of these other competitors in the “entertainment business” can all create their products alone, whereas NFL Football is only created when at least two teams are affiliated into a league and play one another. Furthermore, while it is conceivable that an individual team could fail economically, the league would likely go on, albeit with one fewer team.
191 History, http://worldleagueofamericanfootball.com/id23.html (last visited November 12, 2008). 192 Id. 193 The league later went by the name NFL Europe and later NFL Europa but still failed. NFL Folds Europe League, to Focus on Regular-Season Games Abroad, ESPN, June 29, 2007, http://sports.espn.go.com/nfl/news/story?id=2920738 (last visited November 12, 2008). 194 Wembley to host Dolphins & Giants, http://news.bbc.co.uk/sport1/hi/other_sports/american_football/6248825.stm (last visited November 12, 2008); NFL Chargers/Saints Wembley clash sure to be a sell- out, Daily Mail Online, June 27, 2008, http://www.dailymail.co.uk/sport/othersports/article-1029997/NFL-Chargers-Saints- Wembley-clash-certain-sell-out.html (last visited November 12, 2008).
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2. The NFL Created NFL Properties With the Goal of Promoting the Teams and the League as a Whole
Judge Kanne’s Seventh Circuit opinion in American Needle listed this reason as being the most important for determining that in this case, the NFL was acting as a single entity.195 Judge Kanne noted that “since 1963, the NFL teams have acted as one source of economic power—under the auspices of NFL Properties—to license their intellectual property collectively and to promote NFL Football.”196 The American Needle opinion even goes so far as to quote NFL Properties’ Articles of Incorporation as saying that its purpose is “[t]o conduct and engage in advertising campaigns and promotional ventures on behalf of the [NFL] and the member [teams].”197 Therefore, as a result of forming NFL Properties in 1963, the league has actively engaged in a collective effort to promote and further the league as a whole in its efforts to compete against other forms of entertainment. That NFL Properties was created, coupled with the mission that it was given indicates that the league was aware of its need to raise its profile as a whole in order to compete in the entertainment world.
3. The Market Should Be Drawn Narrowly for Analysis in Antitrust Cases
It may seem strange, but for the purpose of an antitrust law analysis or other competition-related liability, such as trademark violations, the market analyzed can be just as important, if not more so, than the behavior itself that is alleged to violate the law. An example from the realm of trademark law is useful for the purpose of illustration. In Wallace International Silversmiths, Inc. v. Godinger Silver Art Co., Inc., the question posed was whether one
195 American Needle, Inc. v. National Football League, 538 F.3d 736, 744 (7th Cir. 2008). 196 Id. 197 Id.
31 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 producer of silverware had violated the trademark of another.198 The Second Circuit’s decision turned, in part, on what the relevant market for the silverware was—the court held that the relevant market was that for baroque-style silverware, not silverware in general and found no trademark violation.199 For the purpose of antitrust law, the analysis should be the opposite of that used in Wallace International Silversmiths, Inc. If the NFL’s single entity argument is accepted and the thirty-two NFL franchises are treated as a single-entity creating a single product to compete in the broad entertainment market, then it follows that the market for apparel would be similarly broadened to encompass the apparel of other entities. Under this analysis, Minnesota Vikings apparel would not be held to compete against Chicago Bears apparel; rather, the two would together compete against, for example, Major League Baseball (MLB) apparel and NBA apparel, and even licensed apparel for television shows and movies. If the NFL’s exclusive ten-year, $250 million apparel contract200 with Reebok is any indication, there is a lot of money to be made in licensed-apparel. Though not exclusive like the NFL’s contract, MLB signed contracts in 2003 with seven apparel manufacturers collectively worth about $500 million over five years.201
198 Wallace International Silversmiths, Inc. v. Godinger Silver Art Co., 916 F.2d 76 (2d Cir. 1990), cert. denied, 499 U.S. 976 (1991). 199 Id. at 81. 200 Richard Sandomir, Pro Football; Reebok Strikes Exclusive Deal With N.F.L., NEW YORK TIMES, http://query.nytimes.com/gst/ fullpage.html?res=9C0DE0D71039F933A15751C1A9669C8B63 (last visited November 12, 2008). 201 Barry M. Bloom, MLB Signs New Apparel Agreements, MLB.COM, Aug. 4, 2003, http://mlb.mlb.com/news/article.jsp?ymd=20030804&content_id=460263&vkey=ne ws_mlb&fext=.jsp&c_id=mlb (last visited November 12, 2008).
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CONCLUSION
The Seventh Circuit’s opinion in American Needle, Inc. v. National Football League, while not overly surprising given the trajectory of the antitrust law in the wake of Copperweld, provides a good example of courts resolving single entity questions as they arise and not making overly broad holdings that will handcuff courts in future situations. Courts should continue along the Seventh Circuit’s path and continue to develop this area of antitrust law gradually, without making sweeping policy holdings.
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JUST A BUNCH OF FUSSPOTS AND NITPICKERS? THAT PRETTY MUCH SUMS IT UP
∗ PATRICK D. AUSTERMUEHLE
Cite as: Patrick D. Austermuehle, Just a Bunch of Fusspots and Nitpickers? That Pretty Much Sums It Up, 4 SEVENTH CIRCUIT REV. 34 (2008), at http://www.kentlaw.edu/7cr/v4-1/austermuehle.pdf.
INTRODUCTION
The Seventh Circuit has a reputation for being “harshly critical” of attorneys—both in oral arguments and in written opinions—who fail to comply with the Federal Rules of Appellate Procedure or the Court’s Local Circuit Rules.1 Judge Richard Posner, in his opinion in Smoot v. Mazda Motors of America, asked the question: by sanctioning attorneys for relatively small rule violations, are the Seventh Circuit judges simply “being fusspots and nitpickers”?2 Whether the reputation is deserved, the practicing attorney in the Seventh Circuit has an incentive to follow both the federal rules and the court’s local rules—if the rules are ignored, or purposefully contravened, the attorney can be sure of a public rebuke in writing or before the Court during oral argument.3
∗ J.D. candidate, May 2008, Chicago-Kent College of Law, Illinois Institute of Technology. 1 See Howard Bashman, Have 7th Circuit Judges Gone off the Deep End?, LAW.COM, http://www.law.com/jsp/article.jsp?id=1165582068191 (last visited Feb. 9, 2009). The inspiration for this note was derived, in part, from Mr. Bashman’s commentary. 2 469 F.3d 675, 678 (7th Cir. 2006). 3 See e.g. Ambati v. Reno, 2 F. App’x. 500, 501 (7th Cir. 2001); In re Bagdade, 334 F.3d 568, 570 (7th Cir. 2003).
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Smoot provides an interesting ground for discussion: is the Seventh Circuit more likely to sanction or discipline an attorney practicing before it than the rest of the Circuit Courts? Is this practice commonplace, or are the Seventh Circuit judges merely “nitpicking”? In Smoot, both Plaintiffs’ and Defendants’ attorneys were reprimanded for failing to follow Federal Rule of Civil Procedure 28(a)(1), which requires all parties to submit a diversity statement when the case is before the Court on diversity grounds.4 After each party submitted appellate briefs which included deficient jurisdictional statements, the Court ordered the attorneys to submit supplemental jurisdictional statements which properly laid out the grounds for diversity jurisdiction.5 Unfortunately, neither party properly alleged sufficient grounds for diversity jurisdiction in their supplemental jurisdictional statements.6 The attorneys’ failure to file adequate jurisdictional statements was addressed in the opinion.7 As for the court’s rationale, it explained:
We have been plagued by the carelessness of a number of the lawyers practicing before the courts of this circuit with regard to the required contents of jurisdictional statements in diversity cases. It is time ... that this malpractice stopped. We direct the parties to show cause within 10 days why counsel should not be sanctioned for violating Rule 28(a)(1) and mistaking the requirements of diversity jurisdiction. We ask them to consider specifically the appropriateness, as a sanction, of their being
4 Smoot, 469 F.3d at 676; FED. R. APP. P. 28(a)(1). 5 See Smoot v. Mazda Motors of America, No. 01-3006 (7th Cir. Dec. 12, 2005) (Docket Entry of Nov. 29, 2006). 6 Smoot, 469 F.3d at 676. Plaintiff’s jurisdictional statement claimed that the amount in controversy was equal to rather than in excess of the statutory requirement for diversity jurisdiction. Id. Both parties’ jurisdictional statements failed to adequately explain the diversity of citizenship requirement for diversity jurisdiction. Id. 7 Id. at 676-77.
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compelled to attend a continuing legal education class in federal jurisdiction.8
After a relatively lengthy discussion before reaching the merits, the Court decided that whether the elements of diversity were met was of no matter: the attorneys did not comply with the diversity statement rule and were therefore ordered to show cause why they should not be sanctioned and required to enroll in a continuing education class on federal jurisdiction.9 Judge Terrance Evans concurred in the Court’s opinion on the merits, but dissented on the issue of attorney sanctions:
I decline to join the court's stinging criticism of the attorneys regarding their less-than-perfect jurisdictional statements. Sure, the plaintiffs should have said the amount in controversy exceeds $75,000, not that it is $75,000. And sure, both sides stumbled on their declarations regarding the dual citizenship of the corporate defendants. But, at best, these are low misdemeanors; yet the court treats them like felonies. . .I would not issue an order to show cause, and I certainly would not suggest that an appropriate sanction might be to compel the lawyers' attendance at “a continuing legal education class on federal jurisdiction.”10
Are the justices of the Seventh Circuit simply being “fusspots and nitpickers”? Or do Federal Appellate Courts on the whole treat rule-breaking attorneys in a similar manner? Simply examining a small sample of Seventh Circuit cases and analyzing the Court’s rationale for sanctioning attorneys would not effectively answer Judge Posner’s question, as too many variables exist from case to case. Instead, the court’s tendency to issue sanctions is more appropriately
8 Id. at 677-78 9 Id. 10 Id. at 682.
36 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 analyzed and discussed by empirically comparing it to the rest of the Federal Courts of Appeal. By undertaking an empirical survey of Seventh Circuit’s dockets and decisions which impose sanctions on attorneys for failure to comply with the Federal Rules of Appellate Procedure or the Seventh Circuit’s local rules and comparing the results to similar surveys of the federal courts of appeal as a whole, this note will provide an empirical answer to Judge Posner’s question. Part I describes the power of the federal courts to issue sanctions and discipline attorneys for failure to follow local and federal rules. Part II lays out the parameters of the empirical research, including both the rationale for the data collection and the methodology. Part III presents the results by comparing the types and frequency of sanctions issued by the Seventh Circuit and the U.S. courts of appeals collectively. Part IV will further discuss the data on attorney sanctions and discipline through a comparison of a specific appellate court’s composition by political party of appointing President.
I. THE DISCIPLINARY POWER OF FEDERAL APPELLATE COURTS
Federal appellate courts have extensive power to sanction or discipline attorneys for misbehavior before the court. This power has been manifested in various statutory rules, most importantly Federal Rule of Appellate Procedure 46. Rule 46 provides:
(b) Suspension or Disbarment. (1) Standard. A member of the court's bar is subject to suspension or disbarment by the court if the member: (A) has been suspended or disbarred from practice in any other court; or (B) is guilty of conduct unbecoming a member of the court's bar. (2) Procedure. The member must be given an opportunity to show good cause, within the time prescribed by the court, why the member should not be suspended or disbarred.
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(3) Order. The court must enter an appropriate order after the member responds and a hearing is held, if requested, or after the time prescribed for a response expires, if no response is made.
(c) Discipline. A court of appeals may discipline an attorney who practices before it for conduct unbecoming a member of the bar or for failure to comply with any court rule. First, however, the court must afford the attorney reasonable notice, an opportunity to show cause to the contrary, and, if requested, a hearing.11
Thus, Rule 46 allows a court of appeal to discipline attorneys who practice before it for “conduct unbecoming a member of the bar” or for failure to comply with any court rule or order.12 Because the “conduct unbecoming a member of the bar” standard in Rule 46 is so broad, courts have pointed out several factors that will be considered in determining whether disciplining an attorney is appropriate:
[A] Court of Appeals carefully examines the circumstances of the particular situation, keeping in mind that the purpose of imposing sanctions is to protect litigants and possible future clients from further misfeasance, and deter other members of the bar from doing the same, and also considers the effect of the sanction on the individual attorneys involved.”13
Because this rule provides appellate court judges very broad sanctioning power, the decision to utilize the power is subjective; in any given scenario where an attorney fails to comply with a procedural
11 FED. R. APP. P. 46(b), (c). On its face, the rule allows an Appellate Court to sanction only a member of that specific court’s bar association. However, “the disciplinary power is not limited to attorneys admitted to practice in Court.” Ambati v. Reno, 2 F. App’x 500, 501 (7th Cir. 2001). 12 FED. R. APP. P. 46(c) 13 Ambati, 2 F. App’x at 501.
38 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 rule or a court order, the court may sanction or discipline the attorney.14 However, in many instances—especially with respect to trivial rule violations—judges refrain from issuing a sanction or an order to show cause.15 Generally, the quality of filings and attorney professionalism before any of the federal appellate courts is equivalent. It seems safe to assume that the First Circuit’s bar does is not comprised of a significant amount of “rule-breakers,” or that the Eleventh Circuit’s bar is not comprised of infallible attorneys. Although this is merely an assumption, for the purposes of this research it should be taken at face value. By assuming that the quality of any federal bar’s attorneys is equal, examining the types and number of disciplinary actions taken by any court will reveal the “disciplinary demeanor” of any given circuit court of appeals and may conclude that Judge Posner and his colleagues actually are just a bunch of “fusspots and nitpickers”.
II. THE SURVEY
A. Methodology
In conducting this empirical research many variables must be accounted for. Most important is determining what types of sanctions will be included in the empirical data. Attorneys can be sanctioned through various means. For example, in Smoot, the attorney was admonished in the Court’s opinion on the merits for allegedly improper attorney conduct.16 These “written sanctions” will be among the data collected included in the survey.17 Further, an appellate court
14 Id. 15 For a real-life illustration of this concept, see Bashman, supra n. 1. 16 Smoot, 469 F.3d at 677. 17 However, every opinion issued by the 7th Circuit during the relevant time period which discussed sanctioning an attorney had a corresponding docket entry which sanctioned or threatened to sanction an attorney. Compare Smoot, 469 F.3d at 677 with Smoot v. Mazda Motors of America, No. 01-3006 (7th Cir. Dec. 12, 2005) (Docket Entry of Nov. 29, 2006). Instead of collecting data by searching for
39 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 will frequently reprimand or threaten to impose a disciplinary action on an attorney by issuing an order that explains the allegedly improper conduct, and requires the attorney to provide an explanation to the court.18 These types of sanctions will be included in the result. The methodology of this empirical study will be described in 4 relevant sections: period and scope, breadth of inquiry, data collection methodology, and baseline statistics.
i. Period and Scope
First, the data collection period is a critical step in setting up the survey.19 The period of data collection is September 30, 1997 to September 29, 2007. There are several reasons for choosing this ten- year period. First, the Director of the U.S. Courts publishes a Judicial Business Report and a Federal Court Management Statistics Report on a yearly basis, with data collection ending for each year on September 30.20 By using these dates, an official report of federal appellate court statistics can be relied upon for all baseline appellate filing numbers. Further, a 10-year period is sufficiently lengthy to ensure enough relevant data but not so lengthy as to represent a sample size which reflects a drastically different court composition. Additionally, the data collected on attorney sanctions from the Seventh Circuit would not be informative on its own. This note will compare the results collected from the Seventh Circuit to both the US courts of appeal as a whole, as well as to each circuit individually. sanctions being discussed in opinions, this study collected data solely from the courts’ dockets. 18 See e.g. Fairley v. Andrews, No. 07-3343(7th Cir. Sep. 27, 2007) ( Docket Entry of Nov. 13, 2007); Gabriel v. Bumann, No. 01-3006 (7th Cir. Aug. 1, 2001) (Docket Entry of Aug. 16, 2001). 19 Choosing an overly expansive period of time may nullify the results, as the composition of the court has significantly changed over the past quarter century. Too short of a period will not provide enough data to be relevant. Therefore, choosing a middle ground that provides enough data, and is focused on the basic makeup of the court as it sits today, is critical. 20 See DIRECTOR OF U.S. COURTS, FEDERAL COURT MANAGEMENT STATISTICS, 1997-2007, http://www.uscourts.gov/fcmstat/index.html (last visited Feb. 9, 2009)..
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ii. Breadth of Inquiry
The parameters that establish relevant data collection are the most important aspect of the study. By failing to include relevant potential data points in the survey, too little data may be collected. Over expansion of the search or careless search criteria will provide irrelevant data. Therefore, determining (a) the types of sanctions that will be searched for, and (b) the manner of sanctioning, are the most important choices in this study. Generally, appellate attorneys can be sanctioned in two forms. First, while the case is pending before the court, an attorney can be threatened with sanction or discipline. This type of sanction will appear in the case docket.21 Second, an attorney can be sanctioned, disciplined, or admonished within the court’s written opinion. However, only sanctions which appear in the docket will be collected in this study.22
a. Sanctions within the Docket
Because many of the issues that the court has with attorneys are resolved before the opinion on the merits is published, the majority of a court’s disciplinary or sanctioning function is carried out in pre- opinion orders and rulings. The empirical data will be collected from the courts’ dockets during the relevant time period. A large portion of the disciplinary orders issued by the court in the docket are based on an attorney’s failure to comply with a Federal Rule of Appellate Procedure or for failing to comply with a previous order issued by the court in that case. Such an order typically appears within a docket as follows:
21 See e.g. Hicks v. Midwest Transit, No. 06-2186 (7th Cir. April 27, 2006) (Docket Entry of Nov. 5, 2007). 22 See supra note 17.
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11/28/04 ORDER: BEVERLY M. RUSSELL FOR APPELLEE RUSSELL RAU, APPELLEE E. A. STEPP, APPELLEE G. L. HERSHBERGER, APPELLEE KATHLEEN H. SAWYER, APPELLEE JOHN D. ASHCROFT IS DIRECTED, AS COUNSEL, TO SHOWCAUSE AS TO WHY DISCIPLINARY ACTION SHOULD NOT BE TAKEN PURSUANT TO FED. R. APP. P. 46(C), FOR FAILING TO RESPOND TO THE COURT'S ORDER OF NOVEMBER 1, 2004.23
A court will ask why disciplinary action should not be taken for a multitude of reasons. Some examples include: “[F]or failing to prosecute the appeal”24; “for failing to respond to the court’s order [requiring the filing of a supplemental statement of jurisdiction]”25; or for failing “to respond to the court’s order [requiring the filing of a status report regarding the completion of the transcripts referred to in Plaintiffs-Appellant’s Motion.]”26 The court can issue such an order based on any attorney infraction, be it a violation of a Federal Rule of Appellate Procedure, a Circuit Rule, or a previous court order.27 This type of on-the-docket disciplinary order will be referred to as a Potential Disciplinary Order. Similarly, the court can order an attorney to explain why he or she should not be sanctioned based on a wide variety of violations. Such an order typically appears within a docket as follows:
08/08/2000 ORDER: COUNSEL FOR THE PETITIONERS ARE DIRECTED TO SHOW CAUSE
23 Allen v. Ashcroft, No. 04-2390 (7th Cir. June 1, 2004) (Docket Entry of Nov. 18, 2004). 24 Essex v. Bd. of Educ., No. 01-3581 (7th Cir. Oct. 1, 2001) (Docket Entry of Feb. 28, 2002). 25 Hicks v. Midwest Transit, No. 06-2186 (7th Cir. April 27, 2006) (Docket Entry of Nov. 5, 2007). 26 Fairley v. Andrews, No. 07-3343(7th Cir. Sep. 28, 2007) (order to show cause) (Docket Entry of Nov. 13, 2007). 27 FED R. APP. P. 46(c).
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WHY THEY SHOULD NOT BE SANCTIONED FOR PLACING THEMSELVES IN A POSITION WHERE THEY WERE UNABLE TO ARGUE ORALLY ON BEHALF OF THEIR CLIENTS. [1314774-1] AJM [99- 3211] RESPONSE TO SHOWCAUSE DUE 8/22/00 FOR JOHN W. KEARNS. (SQUI)28
Orders requiring an attorney to explain why he or she should not be sanctioned29 are based on an even wider variety of issues than a Potential Disciplinary Order. Some examples include: “For making a frivolous argument in light of Fed. R. App. P. 39(A)(4) and the discretion it accords to this court in assessing costs”30; “for [the attorney’s] failure to inform us that the board of immigration appeals had granted a motion to reopen in this case eight months before we issued our opinion”31; for “[filing a] contumacious motion”32; or “for filing a frivolous appeal and impugning the integrity of the bankruptcy judge in [the] reply brief.”33 This type of on-the-docket order will be referred to as a Potential Sanctioning Order. The court can order an attorney to defend him or herself against potential sanctions for any reason that it sees fit.34
28 Ambati v. INS, No. 99-3211 (7th Cir. Aug. 30, 1999) (Docket Entry of Dec. 6, 2000). 29 Occasionally, instead of asking why an attorney should not be sanctioned, the court will ask why he or she should not be penalized. See e.g. Aziz v. Tri-State University, No. 99-2866 (7th Cir. Sep. 23, 1999) (Docket Entry of Feb. 2, 2002). 30 Bean v. WI Bell Inc., No. 03-1983 (7th Cir. April 14, 2003) (Docket Entry of May 27, 2004). 31 Boctor v. Gonzales, No. 05-2530 (7th Cir. May 26, 2005) (Docket Entry of Feb 16, 2007). 32 Google, Inc. v. Cent. Mfg., Inc., No. 07-1569 (7th Cir. Mar 15, 2007) (Docket Entry of July 25, 2007). 33 Lester v. Vance, No. 00-3027 (7th Cir. Aug. 10, 2007) (Docket Entry of Mar. 3, 2001). 34 FED. R. APP. P. 46(c).
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A court may also issue an order to show cause to an attorney for a potential rule or order violation. Such an order typically appears on the docket as follows:
08/24/2006 ORDER: PETITIONERS ARE ORDERED TO SHOW CAUSE FOR THEIR FAILURE TO RESPOND TO THE MOTION TO DISMISS, AS ORDERED BY THIS COURT ON AUGUST 1, 2006. THE RESPONSE TO THIS ORDER IS DUE BY AUGUST 31, 2006. [1864839-1] JD [04-3341, 05-2529] (MANK) [04- 3341 05-2529]35
An attorney can be ordered to show cause, for example, for “why [he] failed to file a timely response”36 or “why he should not be fined $1,000 for his violation of Circuit Rule 30.”37 This type of on-the- docket disciplinary order will be referred to as an Order to Show Cause. Although every Order to Show Cause indicates a willingness on the part of a given court to exercise its disciplinary function, Orders to Show Cause which themselves do not refer to sanctioning or disciplining an attorney can be much less serious:
“07/12/1999 SHOW CAUSE ORDER: APLNT HAS FAILED TO PAY TO THE CLERK OF THIS COURT THE REQUISITE DOCKETING FEE. PETITIONER IS DIRECTED TO SHOW CAUSE WITHIN 15 DAYS, WHY THIS APPEAL SHOULD NOT BE DISMISSED FOR FAILURE TO PROSECUTE [99- 2697]”38
36 Berinde v. Gonzales, No. 06-1109 (7th Cir. Jan. 11, 2006) (Docket Entry of Apr. 18, 2006). 37 Normand v. Orkin Exterminating, No. 98-4111 (7th Cir. Dec. 7, 1998) (Docket Entry of Oct.12, 1999). 38 Argueta-Martinez v. INS, No. 99-2697 (8th Cir. June 18, 1999) (Docket Entry of July 12, 2004).
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In many instances, these types of procedural Orders to Show Cause seem to be automatically exercised. If an appellant fails to pay the court’s fees, the case can be dismissed on procedural grounds, and an Order to Show Cause is the court’s preferred method of doing so.39 Therefore, for purposes of studying the results of the survey, data can be sorted based on whether the court is threatening a sanction or discipline and when the court is issuing an order to show cause for a litigant’s procedural default or other rule violation. Both types of data will be collected, but focusing specifically on the serious instances of sanctions and disciplinary threats may provide an alternate picture of how willing a specific court is to voluntarily exercise its disciplinary authority. It would be nearly impossible to search the courts’ dockets based on particular Federal Appellate Rules or Circuit Rules and retrieve relevant data, as each appellate court has different Circuit rules and applications of those rules. Additionally, potential sanctions or disciplinary actions based on an attorney’s failure to comply with an order issued by the court earlier in the case would be impossible to find. By focusing the search on the court’s language and method in issuing sanctions or potential sanctions (i.e. requesting an attorney to prepare a statement as to why he or she should not be sanctioned), as opposed to searching the dockets for the underlying rule upon which the sanction is based, relevant data can be collected across every circuit. The relevant data to be collected from the appellate courts’ dockets is therefore comprised of Potential Disciplinary Orders, Potential Sanctioning Orders, and Orders to Show Cause.
iii. Data Collection Methodology
With the desired criteria selected, the next step is performing a search which will effectively yield the data. The overall search is comprised of various individual searches, and all results are cross-
39 See Id.
45 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 referenced to eliminate double-counting. Because Westlaw provides access to every federal court’s dockets (and, unlike PACER, is free of charge for a law student), all searches were conducted through Westlaw.
A. Potential Disciplinary Orders
1. Search 1: [“DISCIPLIN! ACTION SHOULD NOT BE TAKEN” or “DISCIPLIN! ACTION WILL BE TAKEN”] a. Rationale: The most frequently used language in issuing this type of order is “Attorney for litigant X must submit Y arguing ‘WHY DISCIPLINARY ACTION SHOULD NOT BE TAKEN’”. Occasionally, the court will phrase the order “Attorney for litigant X must submit Y or ‘DISCIPLINARY ACTION WILL BE TAKEN’”. The search query accounts for both variants. Additionally, the root expander (!) accounts for any variation on the word disciplinary, i.e. disciplining.
2. Search 2: [“SHOULD NOT BE DISCIPLIN!”] a. Rationale: Often (but not as frequently as in Search 1), the docket entry will read “Attorney for litigant X must do Y explaining ‘WHY THEY SHOULD NOT BE DISCIPLINED FOR Z.’”
B. Potential Sanctioning Orders
1. Search 1: [“SHOULD NOT BE SANCT!” or “SHOULD NOT SANCT!”] a. Rationale: The most frequently used language in issuing this type of order is “Attorney for litigant X must submit Y arguing why he/she ‘SHOULD NOT BE SANCTIONED for Z’”. Occasionally, the court will phrase the order “Attorney for litigant X must submit Y arguing why the Court ‘SHOULD NOT SANCTION him/her for Z’”. The search query accounts for both variants. Additionally, the root expander (!) accounts for any variation on the word sanction.
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2. Search 2: [“46(c)”] a. Rationale: Often, a court’s docket will mention the specific Rule under which the Court has the authority to sanction an attorney. Although many of the results contained in this search are captured in Search 1, there is a significant number which are not, and the search is therefore necessary.
3. Search 3: [“SANCT! RESPONSE” or “SANCT! STATEMENT”] a. Rationale: In some instances, the Court will issue a directive to an attorney warning of potential sanctions without using the phrases contained in Search 1, or mentioning the law (contained in Search 2). However, in these instances the court will direct the attorney to provide the court with a sanction response or a sanction statement. This search captures both variations.
4. Search 4: [“SHOULD NOT BE PENAL!” or “SHOULD NOT PENAL!”] a. Rationale: Occasionally the court will substitute penalized for sanctioned. This search captures the few instances in which courts use these alternate phrasings.
C. Orders to Show Cause
1. Search 1: [“ORDERED TO SHOW CAUSE”] a. Rationale: The most frequently used language in issuing this type of order is “Attorney for litigant X is ‘ORDERED TO SHOW CAUSE’ why he/she did Z’”.
2. Search 2: [“DIRECTED TO SHOW CAUSE” or “DIRECT! /4 SHOW CAUSE”] a. Rationale: Sometimes the court will substitute the word directed for ordered. This also allows the court to phrase the order “the court DIRECTS attorney Y to SHOW CAUSE for Z”. Using the /4 requires the word directed (or directs, directing, etc.) to occur within 4 words of the phrase show cause. Because the order usually only reads
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“directs NAME to show cause” or “directs ATTORNEY FOR NAME to show cause,” this search will catch all instances of this language.
iv. Baseline Statistics
In order to determine the relative frequency of attorney sanctions in the Seventh Circuit, the results must be compared with the results of the federal appellate courts as a whole, as well as with the circuits individually. The baseline data to which the collected data is compared is provided in this chart40:
Table 1: Appeals Filed by Circuit
Appeals Circuit Filed
1 18426 2 62288 3 42193 4 54081 5 93331 6 53583 7 37956 8 35667 9 128423 10 29332 11 77253 DC Cir 15110
40 See DIRECTOR OF U.S. COURTS, supra note 20.
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41 PART II: RESULTS
A. Finding 1: The Seventh Circuit exercises its disciplinary function at the fourth-highest rate of any Federal Appellate Court.
During the ten-year period between September 29, 1997 and September 30, 2007, the Seventh Circuit disciplined, sanctioned, or ordered an attorney to show cause for a rule violation in 1,007 cases, which equates to a ratio of 26.53 sanctions per 1,000 appeals filed. The court that exercised its disciplinary function the most frequently was the Eighth Circuit, which did so in 2,315 cases, and which equates to a ratio of 64.91 sanctions per 1,000 appeals filed. The Sixth Circuit was the least likely to exercise its disciplinary function – it did so only 36 times, which equates to .67 sanctions per 1,000 appeals filed. The following table provides the total number of sanctions issued by each Federal Circuit, as well as the ratio of sanctions per 1,000 appeals filed.
41 After collecting the data, there were many instances of cases that appeared in two or more searches. For example, this could occur when a docket entry such as “Petitioner is ordered to show cause why he should not be disciplined for . . .” This docket entry would have been retrieved under more than one search. Therefore, in order to prevent any case from being counted twice, I sorted through all cases collected in the survey and removed any instances a case being returned more than once.
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Table 2: Total Sanctions and Ratios by Circuit
Number of Circuit Sanctions Appeals Filed Per 1000
1 766 18426 41.57169 2 92 62288 1.47701 3 239 42193 5.664447 4 106 54081 1.960023 5 61 93331 0.653588 6 36 53583 0.671855 7 1007 37956 26.53072 8 2315 35667 64.90594 9 624 128423 4.858943 10 141 29332 4.807037 11 75 77253 0.970836 DC Cir 846 15110 55.98941
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Graph 1: Total Sanctions and Ratios by Circuit
B. Finding 2: The Seventh Circuit issues “serious” sanctions or disciplinary orders at the highest rate of any Federal Appellate Court.
Based on the differing values equated to each type of docket entry described in Part II (B), the Seventh Circuit issued the most Potential Disciplinary Orders or Potential Sanctioning Orders.” Disregarding all instances of Orders to Show Cause, the Seventh Circuit exercised its sanctioning authority in 824 cases, which equates to a ratio of 21.71 sanctions per 1,000 appeals filed. The Eleventh Circuit was the least likely to issue serious sanctions, doing so in 10 cases, which equates to a ratio of .13 sanctions per 1,000 cases filed. The following table (Table 2) provides the total number of serious sanctions issued by each
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Federal Circuit, as well as the ratio of sanctions per 1,000 appeals filed.
Table 3: “Serious” Sanctions and Ratios by Circuit
"Potential "Potential Disciplinary Sanctioning Appeals Per 1,000 Circuit Order" Order" Total Filed Appeals 1 3 5 8 184260.4341 69 2 7 28 35 62288 0.561906 3 1 31 32 42193 0.75842 4 0 99 99 54081 1.830587 5 25 12 37 93331 0.396438 6 0 26 26 53583 0.485229 7 659 165 824 37956 21.70935 8 102 1 103 35667 2.887823 9 14 205 219 128423 1.705302 10 58 21 79 29332 2.693304 11 0 10 10 77253 0.129445 DC Cir 0 14 14 15110 0.926539
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Graph 2: “Serious” Sanctions and Ratios by Circuit
PART IV: POLITICAL CORRELATION
C. Finding 3: There is a statistically significant correlation between the composition of a given appellate court—based on the nominating President’s political party—and that court’s propensity to exercise its disciplinary function
After collecting the data and studying the results we investigated whether any correlations could be drawn from the quantitative data. It appears there is a statistically significant correlation between the political composition of a given appellate court and its propensity to sanction or discipline an attorney before it. Generally, the more Republican-appointed judges serve on an appellate court, the more likely that the court is to sanction attorneys.
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In order to compare the data collected on sanctions and disciplinary actions to the political composition of an appellate court a nume rica l standard was developed to make the comparison. To do so, a graph of each judge who has sat on an appellate court during the relevant ten-year time frame was prepared and then a calculation of calculated the length of their tenure on the court was used to compute a political quotient of each appellate court based on the number of months each political party’s candidates have served on the court.42 The table below reflects the composition of each federal appellate court based on the nominating President’s political party.
Table 443: Judicial Composition of Circuit – Based on Political Party of Appointing President: September 30, 1997 through September 29, 2007
Republican Democrat 1 68.18% 31.82% 2 35.97% 64.03% 3 59.44% 40.56% 4 58.70% 41.30% 5 67.08% 32.92% 6 49.66% 50.34% 7 63.64% 36.36% 8 73.73% 26.27% 9 64.34% 35.66% 10 58.59% 41.41% 11 57.36% 42.64% DC Cir 58.72% 41.28%
42 Frequently, seats on an appellate court are left vacant for extended periods of time. When computing the political quotient of a given court, vacancies were treated as if they did not exist during the time they were vacant. 43 FEDERAL JUDICIAL CENTER, THE U.S. COURTS OF APPEALS AND THE FEDERAL JUDICIARY, http://www.fjc.gov/history/home.nsf/ca_frm!OpenFrameSet (last visited Nov. 11, 2008).
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The political quotient of each court, was compared to the results to the data collected on sanctions. A correlation definitely exists: between the greater Republican political quotient of a given court, the more likely that court is to exercise its disciplinary function. The most Republican influenced court—the Eighth Circuit, where Republican judges composed 73% of the court during the relevant 10 year time frame—was also the most likely to issue sanctions. The second-most Republican influenced court—the First Circuit, where Republican judges composed 68% of the court—was the third-most likely to issue sanctions. The chart below provides the compiled data and the graphs provide a visual representation of the correlation.
Table 5: Sanctions / Political Quotient by Circuit (Ranked)
% Republican Circuit Sanctions Per 1000 Appeals Rank Appointed Rank
1 41.57 3 68.18% 2 2 1.48 9 35.97% 12 3 5.66 5 59.44% 6 4 1.96 8 58.70% 8 5 0.65 12 67.08% 3 6 0.67 11 49.66% 11 7 26.53 4 63.64% 5 8 64.91 1 73.73% 1 9 4.86 6 64.34% 4 10 4.81 7 58.59% 9 11 0.97 10 57.36% 10 DC Cir 55.99 2 58.72% 7
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Graph 3: Sanctions / Political Quotient by Circuit (Ranked)
Graph 4: Sanctions / Political Quotient by Circuit (Raw Data)
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Although there are a few circuits that do not conform to the general rule—most notably, the Fifth Circuit—there is a general, positive correlation between the amount of Republican President appointed judges that sit on a given appellate court and its propensity to use its disciplinary power. Statisticians use a tool called the Pearson Product-Moment Correlation Coefficient (Pearson’s Correlation) in order to assess the strength of a particular apparent correlation.44 Pearson's Correlation is a way of summarizing the strength of a linear relationship between two variables with a single figure that ranges between 1 and +1. The stronger the relationship between the variables, the closer the correlation figure is to ±1.45 The two variables in this case are sanctions per 1000 cases filed and percent Republican appointees. A high positive Pearson’s Correlation in this case would indicate that as the percentage of Republican appointees increased on a given appellate court, the number of sanctions issued by that court would increase. A high negative Pearson’s Correlation would indicate that as the percentage of Republican appointees increased, the number of sanctions would decrease. A low Pearson’s Correlation would indicate that there is not a strong relationship between the two variables. The Pearson’s Correlation between sanctions per 1000 cases filed and percent Republican appointees is 0.515, which represents a statistically significant correlation at a 90% alpha level (or probability).46
44 JACOB COHEN ET AL., APPLIED MULTIPLE REGRESSION/CORRELATION ANALYSIS FOR THE BEHAVIORAL SCIENCES, 27-28 (3d ed. 2003). 45 In order to illustrate the meaning of the Pearson Product Moment Coefficient, an example is helpful: the Pearson’s Correlation between “foot size” and “height” in a sample of human beings would be high, while the Pearson’s Correlation between “foot size” and “individual net worth” would be low. 46 MARK SIRKIN, STATISTICS FOR THE SOCIAL SCIENCES, 507 (3d ed. 2003). Alpha Level represents the statistician’s “willingness to be wrong.” Id. On the most basic level, a 90% alpha level signifies that the probability that the statistically significant correlation has occurred by chance is 10%. Id. In social science studies,
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CONCLUSION
By examining the empirical data on each federal court of appeals, the Seventh Circuit’s willingness to issue sanctions or exercise its disciplinary power can be seen. The Seventh Circuit issued the fourth- most sanctions overall and issued the most serious sanctions. In the end, the data suggests that the Seventh Circuit may be “nitpicking” to a certain degree, but that there are other circuits that are nearly as critical of attorneys. Additionally, the data shows a correlation between the political composition of any given court—based on the appointing President’s political party—and its propensity to exercise its disciplinary function. Although the data does not indicate any cause/effect relationship, it is interesting and may warrant additional research.
an alpha level of 90% is acceptable. In “hard science” studies, an alpha level of 95% is acceptable, but more commonly a 99% alpha level is used. Id.
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LET’S GET IT STRAIGHT: THE EFFECT OF FEHRIBACH, THE HA2003 LIQUIDATING TRUST, AND JOYCE ON A DEBTOR’S PRE-BANKRUPTCY PROFESSIONALS AND WHERE TO GO FROM HERE
∗ JAMIE L. JOHNSON
Cite as: Jamie L. Johnson, Let’s Get It Straight: The Effect of Fehribach, The HA2003 Liquidating Trust, and Joyce on a Debtor’s Pre-Bankruptcy Professionals and Where to Go From Here, 4 SEVENTH CIRCUIT REV. 59 (2008), at http://www.kentlaw.edu/7cr/v4-1/johnson.pdf.
INTRODUCTION
Many times when a business files for bankruptcy under the United States Bankruptcy Code no assets remain for the debtor’s general unsecured creditors.1 This lack of assets leaves the pre-bankruptcy creditors scrambling to find someone to compensate them for their resulting losses.2 Who might that someone be? Not the debtor’s professionals, according to the United States Court of Appeals for the Seventh Circuit.3
∗ J.D. candidate, May 2009, Chicago-Kent College of Law, Illinois Institute of Technology; Eastern Illinois University, magna cum laude, B.A., May 2006. 1 See Steve Jakubowski, 7th Circuit Nixes Attempts to Hold Investment Bankers Responsible for Matters Beyond Their Engagement Agreements, BANKRUPTCY LITIGATION BLOG, Aug. 25, 2008, http://www.bankruptcylitigationblog.com/archives/cat-litigation-lore. See generally Bankruptcy Code 11 U.S.C. §§ 1001-9036 (2006). 2 See Jakubowski supra note 1. 3 See e.g., Fehribach v. Ernst & Young, LLP, 493 F.3d 905 (7th Cir. 2007) (Rovner, I., concurring); HA2003 Liquidating Trust v. Credit Suisse Securities 59
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Businesses have the option of outsourcing their accounting or financial advising needs to specialized firms, rather than conduct these services in-house.4 This Article refers to these firms as the debtor’s professionals. After filing for bankruptcy, there is no longer a need for these professionals as the bankrupt business is liquidated.5 This liquidation may occur in either a Chapter 7 bankruptcy proceeding— where the main goal is not to save the dying company but rather to liquidate its remaining assets and close its doors for good—or in a Chapter 11 proceeding—where the plan of reorganization may provide for liquidation.6 Although the bankrupt company’s pre-bankruptcy professionals are no longer employed by the debtor business, all ties between the two may not be completely severed. The trustee, stockholders, or other interested parties may try to recover from these professionals based on their alleged contribution to the business’s demise—which is similar to what occurred in three cases recently decided by the Seventh Circuit.7 In Fehribach v. Ernst & Young, LLP, the court held that the debtor’s accounting firm was not negligent in failing to include a going-concern qualification in its audit report.8 Similarly, in The HA2003 Liquidating Trust v. Credit Suisse Securities (USA) LLC, the court stated that the debtor’s investment banker was not grossly negligent in issuing a fairness opinion that used unsound financial projections.9 Finally, in Joyce v. Morgan Stanley & Co., the Seventh
(USA), LLC, 517 F.3d 454 (7th Cir. 2008); Joyce v. Morgan Stanley & Co., 538 F.3d 797 (7th Cir. 2008). 4 See generally, Brad L. Peterson, When and Why Companies Outsource and Offshore, in, OUTSOURCING AND OFFSHORING 2008 (PLI Patents, Copyrights, Trademarks, & Literary Property, Course Handbook Series Order No. 14714, 2008)(discussing the general advantages and disadvantages of outsourcing). 5 See generally, ELIZABETH WARREN & JAY LAWRENCE WESTBROOK, THE LAW OF DEBTORS AND CREDITORS 369 (5th ed. 2006) (describing the general purpose behind liquidation). 6 Id. at 369, 395. 7 Fehribach, 493 F.3d at 908; HA2003 Liquidating Trust, 517 F.3d at 456; Joyce, 538 F.3d at 799. 8 493F.3d at 909-10. 9 517 F.3d at 457. 60
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Circuit rejected the stockholders’ attempt to hold the business’s financial advisor liable based on a fairness opinion issued in connection with the business’s proposed merger.10 The Seventh Circuit is not the only circuit court to consider the question of whether these third party professionals can be held liable, and if so under what causes of action. Other courts, in addition to the Seventh Circuit, have dealt with cases brought against these professionals under a variety of causes of action, all of which come with their own potential weaknesses.11 The causes of action that will be discussed in greater length throughout this Article are deepening insolvency and standard tort theories such as negligence and constructive fraud. While all of the above theories of liability—along with claims for breach of contract—were rejected in Fehribach, The HA2003 Liquidating Trust, and Joyce, other Circuits have taken differing views, both in considering the controversial theory of deepening insolvency and in determining whether there should be a privity requirement attached to a third party’s ability to bring a tort claim against an outside professional.12 Part I of this Article presents a brief background of what a bankruptcy filed under either Chapter 7 or Chapter 11 of the Bankruptcy Code entails, which is provided to explain why a trustee may feel the need to file suit against these pre-bankruptcy professionals. Part II of this Article examines how these professionals have fared in other circuits and lower federal courts by considering the various causes of action they have been sued under—specifically, deepening insolvency and causes of action under standard tort law. Part III of this Article provides a detailed background of Fehribach, The HA2003 Liquidating Trust, and Joyce and also examines the
10 538 F.3d at 802. Although Joyce was not initiated in connection with a bankruptcy proceeding, the issues decided by the court, in the author’s opinion are both similar to and will have a direct impact on the potential for liability of a debtor’s pre-bankruptcy professionals. Thus, Joyce will be discussed throughout this Article as if the losses suffered by the stockholders are equivalent to the losses suffered through bankruptcy in Fehribach and HA2003 Liquidating Trust. 11 See infra note 36, 57 and accompanying text. 12 See e.g. infra note 44, 46, 52, 62 and accompanying text. 61
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Seventh Circuit’s reasoning and holdings in each of those cases. Finally, Part IV concludes that the Seventh Circuit’s unwillingness to hold a third-party professional liable for the mistakes of management in the aforementioned cases is a step in the right direction. However, an analytical framework for analyzing claims against these professionals is necessary, and Part IV of this Article proposes that the framework used should be analogous to the law as it pertains to lenders in the context of equitable subordination, under which, these professionals would only be held liable under strict circumstances but would not escape liability under all circumstances.
I. COMMERCIAL BANKRUPTCY UNDER THE CODE: A GENERAL OVERVIEW
A. Chapter 7 Liquidation
Chapter 7 of the United States Bankruptcy Code is what is known as “primal bankruptcy” because it reflects the most basic purpose of bankruptcy law as a response to a defaulting business.13 A corporation that enters a Chapter 7 proceeding will see all of its assets liquidated before it expires under state corporate law.14 This is in stark contrast to a case filed under Chapter 11 of the Bankruptcy Code, where the intention is to reorganize the struggling corporation so that it may hopefully emerge from the bankruptcy both leaner and with a reduced debt burden.15 A corporation may find itself in a Chapter 7 proceeding either voluntarily or involuntarily.16 A business may choose to voluntarily file a Chapter 7 petition, enabling it to liquidate its assets in an orderly
13 ELIZABETH WARREN & JAY LAWRENCE WESTBROOK, THE LAW OF DEBTORS AND CREDITORS 372 (5th ed. 2006). 14 Id. at 369. 15 Id. A plan of reorganization in a Chapter 11 proceeding can, however, provide for the liquidation of the debtor’s assets. Id. at 395. 16 Id. at 374-75. 62
SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 fashion because the automatic stay will take effect.17 However, because of the drastic consequences of filing a Chapter 7 petition, many businesses wait until the last possible moment to file—all too often when the value of the company has already been depleted beyond saving.18 A business may also find itself in a Chapter 7 proceeding against its will if an involuntary petition is filed by its creditors.19 Involuntary petitions are rare and section 303 of the Bankruptcy Code makes them relatively difficult to file by including various requirements such as the three-creditor rule—which requires that at least three creditors join in the involuntary petition.20 Once a petition is filed a trustee in bankruptcy is appointed to liquidate and administer the assets of the bankruptcy estate.21 Many Chapter 7 proceedings, however, are considered “no-asset” bankruptcies—meaning there is simply nothing left for the trustee to administer.22 This lack of assets may lead the trustee to file an action against the debtor’s pre-bankruptcy professionals in an attempt to
17 Id. at 373. The automatic stay is a legal mandate which acts as a freeze on any and all attempts to collect a debt from the debtor and all civil litigation involving the rights of the debtor. Katelyn Knight, Comment, Equitable Mootness in Bankruptcy Appeals, 49 Santa Clara L. Rev. 253, 260-61 (2009). See also 11 U.S.C. § 362 (2006). 18 WARREN & WESTBROOK, supra note 14, at 375. 19 Id.; See also 11 U.S.C. § 303 (2006). 20 WARREN & WESTBROOK, supra note 14, at 375. 21 Id. at 134. A trustee in bankruptcy is appointed by the U.S. Trustee, elected by creditors, or appointed by a judge to administer a bankruptcy estate. BLACK’S LAW DICTIONARY (8th ed. 2004). The bankruptcy estate is created with the commencement of a bankruptcy case and constitutes a legal entity separate from the debtor. The property which makes up the bankruptcy estate is protected by the automatic stay from claims of creditors and is subject to the jurisdiction of the bankruptcy court. Steve H. Federstein, Property of the Estate, in, UNDERSTANDING THE BASICS OF BUSINESS BANKRUPTCY AND REORGANIZATION 2008, at 117 (PLI Comm. Law & Practice, Course Handbook Series Order No. 14425, 2008) (Updating Author). See also 11 U.S.C. § 541 (2006). 22 Lucian Arye Bebchuck & Jesse M. Fried, The Uneasy Case for the Priority of Secured Claims in Bankruptcy, 105 YALE L. J. 857, 886 n. 107 (1996) (acknowledging that in the United States general unsecured creditors will receive nothing in bankruptcy eighty percent of the time and four-five cents on the dollar twenty percent of the time). 63
SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 collect more money for the estate—which, in turn, means more money for creditors.23
B. Chapter 11 Reorganization
The central focus of a Chapter 11 bankruptcy is the reorganization of the struggling debtor.24 Such reorganization can include, for example, only paying back a certain percentage of bank loans or extending the amount of time a debtor has to pay back those loans under its previous agreements.25 Ultimately, however, a number of large debtor corporations liquidate through Chapter 11 by creating a plan of liquidation when a plan of reorganization is not feasible.26 A Chapter 11 case may also be converted to a Chapter 7 to effectuate a liquidation.27 As with a Chapter 7 bankruptcy proceeding, a Chapter 11 proceeding may also be commenced by either the filing of a voluntary or involuntary petition.28 Creditors may believe it’s necessary to put a business in a Chapter 11 proceeding to obtain important financial information or allow for the supervision of the debtor without forcing it to close its doors.29 The same requirements exist under section 303 of the Bankruptcy Code for creditors attempting to push a business into a Chapter 11 proceeding as they do for Chapter 7 involuntary bankruptcies.30 Once a case is commenced under Chapter 11, if no trustee is appointed, the debtor becomes a new legal entity known as the “debtor in possession.” 31 The debtor-in-possession is equivalent to the trustee
23 See Fehribach v. Ernst & Young, LLP, 493 F.3d 905, 907 (7th Cir. 2007) (Rovner, J., concurring). 24 WARREN & WESTBROOK, supra note 14, at 395. 25 Id. 26 Id. 27 Id. at 412. 28 Id. at 377. 29 Id. 30 Id. See also 11 U.S.C. § 303 (2006). 31 WARREN & WESTBROOK, supra note 14, at 409. 64
SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 in a Chapter 7 proceeding in terms of most of its powers and obligations in the bankruptcy.32 The main goal of the debtor in possession is to formulate a feasible plan of reorganization. 33 A plan of reorganization can be confirmed by the bankruptcy court even though the plan’s terms do not provide for a distribution to general unsecured creditors, which explains why these creditors would want to bring an action against the debtor’s pre-bankruptcy professionals—because bringing suit against those professionals may be the only way to find a deep-pocket to enable them to recover on their claims.34
II. POTENTIAL CAUSES OF ACTION AGAINST THIRD PARTY PROFESSIONALS AND THEIR VARYING TREATMENT IN THE COURTS THROUGHOUT HISTORY
As is true in the Seventh Circuit, the law pertaining to whether a debtor’s professionals can be held liable for a company’s plunge into bankruptcy varies depending on which cause of action the creditors utilize to make their case. Deepening insolvency, for example, is controversial by nature and has been treated as an independent tort, a theory of damages, or rejected completely depending on which court the theory is presented to.35 For other more standard tort theories— such as negligence and fraud—the difference between the courts centers on the question of whether privity is a prerequisite to the
32 11 U.S.C. § 1107 (2006). 33 WARREN & WESTBROOK, supra note 14, at 609. 34 See 11 U.S.C. § 1129 (2006) (providing the requirements for confirmation of a plan of reorganization). 35 See generally Diane F. Coffino & Charles H. Jeanfreau, Delaware Hits the Brakes: The Effect of Gheewalla and Trenwick on Creditor Claims, 17 J. BANKR. L. & PRAC. 1 ART. 3 (2008) (examining the rejection of deepening insolvency as an independent tort and its contentious existence as a damages theory); Sara E. Apel, Comment, In Too Deep: Why the Federal Courts Should Not Recognize Deepening Insolvency as a Cause of Action, 24 EMORY BANKR. DEV. J. 85, 99-112 (2008) (discussing the current state of the law regarding deepening insolvency). 65
SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 assertion of a claim by a third party against an outside professional, which is determined by looking at the state law governing the action.36
A. Deepening Insolvency: Cause of Action or Damages Theory?
The theory of deepening insolvency argues that directors, officers, corporate affiliates, lenders, and third party advisors should be held liable to the corporation (for its creditors’ benefits) for their participation in deciding to continue operating financially distressed companies through borrowing rather than immediately recommending liquidation.37 In 2001, the United States Court of Appeals for the Third Circuit was the first court to recognize deepening insolvency as an independent tort in Official Committee of Unsecured Creditors v. R.F. Lafferty & Co.38 In upholding the district court’s refusal to grant the outside advisor’s motion to dismiss, the court stated that it believed the Pennsylvania Supreme Court would recognize deepening insolvency as a cause of action because the theory was becoming more universally accepted.39 The Third Circuit also reasoned that under Pennsylvania common law principles “where there is an injury, the law provides a remedy.”40 However, in rationalizing its creation of the new tort, the Lafferty court failed to cite to any specific state law on the subject.41 Not all courts, however, have recognized the concept of deepening insolvency as an independent tort.42 The theory was first
36 John Michael Klamann & Bert Stephen Braud, Third Party Accountant Liability—Prospective Financial Statements Used in Securities Offerings, 45 AM. JUR. TRIALS 113, §38 (2008). 37 Coffino & Jeanfreau, supra note 35. 38 267 F.3d 340 (3rd Cir. 2001); See also Coffino & Jeanfreau, supra note 35; Apel, supra note 35, at 95. 39 Lafferty, 267 F.3d at 352; See also Coffino & Jeanfreau, supra note 35; Apel, supra note 35, at 95-96. 40 Lafferty, 267 F.3d at 351; See also Coffino & Jeanfreau, supra note 35. 41 Apel, supra note 35, at 96. 42 See Coffino & Jeanfreau, supra note 36; Russell C. Silberglied, Keep Your Deepening Insolvency Materials: Harmonizing Brown Schools with Radnor 66
SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 used by the courts as a theory of damages, and while some courts rejected deepening insolvency as a cause of action, they continued to use it to form a measure of damages caused by either breach of duty or another tort.43 The idea of deepening insolvency as a damages theory originated in the Seventh Circuit in Schacht v. Brown, where the court rejected the proposition that a corporation could never sue to recover damages sustained through the prolongation of an insolvent corporation’s life.44 The Third Circuit, however, seemed to reject deepening insolvency as a damages theory and also backtracked on its Lafferty decision in In re CitX Corp. 45 In CitX, the court considered whether the plaintiff could ask for damages based on deepening insolvency in conjunction with his underlying malpractice claim.46 The court noted that causation for deepening insolvency damages was difficult to prove—and was not proven by the plaintiff—and therefore, would be unlikely to be a preferred method of calculating damages.47 The CitX court also attempted to narrow its previous holding in Lafferty—that deepening insolvency could stand as an independent cause of action— by stating that the cause of action requires a pleading of fraud.48 By
Holdings and Post-CitX Case Law: Part I, 27-SEP AM. BANKR. INST. J. 26, 61 (2008). 43 See e.g., Coffino & Jeanfreau, supra note 35, n. 65; In re Greater Southeast Community Hospital Corp. I, 353 B.R. 324, 338 (Bankr. D. D.C. 2006) (deepening insolvency was treated as it was meant to be—a theory of harm); In re Southwest Florida Heart Group P.A., 346 B.R. 897, 898 (Bankr. M.D. Fla. 2006) (deepening insolvency claim was only relevant to measure of damages and was not a cause of action standing alone); In re Flagship Healthcare, Inc., 269 B.R. 721, 728 (Bankr. S.D. Fla. 2001) (deepening insolvency may be used in negligence action as a measure of damages). 44 711 F.2d 1343, 1350 (7th Cir. 1983). See also Apel, supra note 35, at 88. 45 Seitz v. Detweiler, Hershey & Assocs., P.C. (In re CitX Corp.), 448 F.3d 672 (3d Cir. 2006). See also Silberglied, supra note 42, at 61 (CitX limited the principle that even if deepening insolvency was not an independent tort, it could be viewed as a damages theory). 46 CitX, 448 F.3d at 674. 47 Id. at 678; See also Apel, supra note 35, at 101-02. 48 CitX, 448 F.3d at 680-81. See also Apel, supra note 35, at 102. 67
SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 deeming fraud as a necessary component of a deepening insolvency claim, the Third Circuit highlighted the major flaw of the theory— deepening insolvency simply duplicates other existing causes of action.49 The Third Circuit’s decisions in Lafferty and CitX have been interpreted narrowly by some federal courts in their support for deepening insolvency as either a cause of action or a damages theory.50 The history of the theory, however, illustrates its controversial nature, and some federal courts have chosen to reject deepening insolvency altogether—whether pleaded as an independent tort or a damages theory.51 Courts choosing to reject the theory have primarily relied on four grounds to do so: (1) the absence of state law supporting the theory, (2) the business judgment rule, (3) a lack of standing, and (4) in pari delicto as an affirmative defense.52 Although there is a trend toward complete rejection of the theory of deepening insolvency, the precedent laid down in Lafferty continues to create confusion among federal courts.53 This is especially true because the Lafferty decision itself, while recognizing deepening
49 Coffino& Jeanfreau, supra note 35. 50 Apel, supra note 35, at 113-14. Much of the litigation over whether deepening insolvency is a cause of action, damages theory, or neither has taken place in the Third Circuit. Richard I. Aaron, An Overview of Bankruptcy Choices Under Chapter 7, Chapter 11, Chapter 12, and Chapter 13, 1 BKRFUND §1.7, n. 1.10 (2008). 51 See In re Global Serv. Group, 316 B.R. 451 (Bankr. S.D.N.Y. 2004). But see In re Del-Met Corp., 322 B.R. 781 (Bankr. M.D. Tenn. 2005). 52 Apel, supra note 35, at 99-100. The business judgment rule is the presumption that officers and directors of a company make their business decisions on an informed good faith basis while acting with an honest belief that they are doing what is best for their company. Under the business judgment rule, disinterested directors will not be subjected to liability for decisions that were proven unwise. D.J. (Jan) Baker, John Wm. (Jack) Butler, Jr., & Mark A. McDermott, Corporate Governance of Troubled Companies and the Role of Restructuring Counsel, 63 BUS. LAW. 855, 857 (2008). In pari delicto means “equal fault” and, as such, is the basis for a court’s denial of relief. BLACK’S LAW DICTIONARY (8th ed. 2004). 53 Apel, supra note 35, at 112. 68
SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 insolvency as a cause of action, failed to set forth the actual elements of the claim.54 Therefore, a difference exists in what the tort of deepening insolvency actually entails even among courts recognizing the cause of action.55 Unfortunately, sorting through the muddled law relating to deepening insolvency does little to add clarity to exactly when a third party professional can be held liable for the tort or the resulting damages based on an underlying cause of action.
B. Standard Tort Theories: Privity Problems
In a state that completely rejects the theory of deepening insolvency, there are usually a number of other causes of action a creditor may attempt to hold the third party professional liable under.56 Standard common law tort theories such as negligence and fraud are common causes of action for creditors seeking to hold an advisor or accountant liable for their losses stemming from a corporation’s liquidation.57 Historically, however, Justice Cardozo’s seminal decision in Ultramares Corp. v. Touche made it more difficult to hold outsiders who were not in privity with the plaintiff liable under a negligence theory.58 In Ultramares, the action for misrepresentation (both negligent and fraudulent) was brought against a third party accounting firm to recover a loss the plaintiffs allegedly suffered as a result of reliance on an audit prepared by that firm.59 The court, however, refused to find that the law should admit “to liability in an
54 Id. at 113. 55 Id. 56 See generally Klamann & Braud, supra note 37 (specifying the various potential causes of actions or theories a third party accountant can be held liable under). 57 See Id. at §38. While creditors also tend to file breach of contract actions against third party professionals, those actions will not be discussed in this section but will rather only be discussed in the context of the Seventh Circuit’s decisions in Fehribach, The HA2003 Liquidating Trust, and Joyce. 58 174 N.E. 441 (N.Y. 1931); Klamann & Braud, supra note 37, at §38. 59 174 N.E. at 442. 69
SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 indeterminate amount for an indeterminate time to an indeterminate class” and thus held that the accounting firm was not liable.60 Many courts disfavor Ultramares, however, and stemming from that disfavor a number of varying positions have arisen concerning whether a professional can be held liable to a third party under tort theories.61 A number of courts have rejected what is known as the strict privity rule espoused in Ultramares and have instead taken the position advocated by the Restatement (2d) of Torts §552.62 The Restatement’s view has been embraced by as many as nineteen states, and is now considered the majority view.63 This view provides that a third party to a contract can recover for losses suffered as a result of misinformation if that third party is part of a narrow group that the misinformer knows its client will channel the information to as part of a particular business transaction or a substantially similar business transaction.64
60 Id. at 444. 61 Klamann & Braud, supra note 37, at §38. 62 Bovee v. Coopers & Lybrand C.P.A., 272 F.3d 356, 363 (6th Cir. 2001); Barrie v. V.P. Exterminators, Inc., 625 So.2d 1007, 1012 (La. 1993). 63 Barrie, 625 So.2d at 1013. 64 Id. at 1014. Section 552 of the Restatement (2d) of Torts provides: (1) One who, in the course of his business, profession, or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information. (2) Except as stated in Subsection (3), the liability in Subsection (1) is limited to loss suffered (a) by the person or one or more of a limited group of persons for whose benefit and guidance he intends to supply the information or knows that the recipient intends to supply it; and (b) through reliance upon it in a transaction that he intends the information to influence or knows that the recipient so intends or in a substantially similar transaction. (3) The liability of one who is under a public duty to give the information extends to the loss suffered by any of the class of persons for whose benefit the duty 70
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In contrast, the minority view is referred to the “akin to privity” view.65 Courts using this restrictive view extend liability for economic loss only if the defendant is in a relationship with the plaintiff that is deemed “akin to privity.”66 This rule stemmed from the Ultramares decision and a modification of that rule in Credit Alliance Corp. v. Arthur Andersen & Co., requiring “linking conduct” on the defendant’s part.67 The scope of the defendant’s duty as defined by the “akin to privity” rule depends on both the defendant’s state of mind and the parties’ mutual expectations in the underlying contract.68 The minority rule differs from the majority rule in that it requires the precise identity of the third party to be foreseen by the defendants, while the majority view only requires that a narrow group—not the precise membership of that group—be foreseen by the defendants.69 Lastly, courts willing to take an expansive view on the privity question adhere to the foreseeability rule when determining potential professional liability to third parties. Under this rule, third parties can recover “to the extent that damages incurred by non-clients are reasonably foreseeable.”70 Therefore, liability can be extended to all reasonably foreseeable plaintiffs who suffered an economic loss based on an actual and justifiable reliance on a negligent misrepresentation; thereby doing away with the notion of privity altogether. At least three courts follow the foreseeability view in determining potential liability for professionals to third party plaintiffs.71
is created, in any of the transactions in which it is intended to protect them. Restatement (Second) of Torts §552 (1977). 65 Barrie, 625 So. 2d at 1013. 66 Id. 67 Id. See 483 N.E.2d 110 (1985). 68 Barrie, 625 So.2d at 1013. 69 Id. at 1014. 70 Id. at 1013. 71 Id. 71
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III. THE SEVENTH CIRCUIT’S TAKE ON PROFESSIONAL LIABILITY AS SET FORTH IN ITS RECENT DECISIONS
A. Fehribach v. Ernst & Young
Fehribach v. Ernst & Young LLP was initiated with the filing of an adversary complaint by the trustee in bankruptcy against the debtor’s accounting firm. 72 The complaint alleged causes of action for both negligence and breach of contract for the accounting firm’s failure to include a going-concern qualification in the audit report the firm had prepared for the debtor, Taurus Foods, Inc. 73 Taurus Foods was a small distributor of frozen meats and other foods before it was forced into an involuntary bankruptcy by three of its creditors.74 In October of 1995, Ernst & Young, acting in its capacity as auditor for Taurus Foods, prepared an audit report for Taurus’s 1995 fiscal year, which ran from January 1994 through January 1995.75 In that report, Ernst & Young indicated that there was no “substantial doubt” that Taurus’s business was capable of continuing as a going concern until at least January of 1996. 76 In May of 1996, Taurus’s principal banker, Bank One, became alarmed at the company’s financial condition and transferred the account to an office specializing in risky loans.77 After the account was transferred, the new office began imposing greater restrictions on Taurus, and its financial deterioration continued at an increased pace.78
72 493 F.3d 905 (7th Cir. 2007) (Rovner, J., concurring). Adversary proceedings are subactions of a bankruptcy case that arise within the bankruptcy case. Joseph J. Bassano, et.al., Fundamentals of Bankruptcy Practice, 9 AM. JUR. 2D BANKRUPTCY §87 (2008). 73 Fehribach, 493 F.3d at 907. Going concern is defined as “a commercial enterprise actively engaging in business with the expectation of indefinite continuance.” BLACK’S LAW DICTIONARY (8th ed. 2004). 74 Fehribach, 493 F.3d at 907. 75 Id. 76 Id. at 907-08 77 Id. at 908. 78 Id. 72
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In an effort to rescue the company from its demise, the Chief Financial Officer began to defraud Bank One by inflating the company’s sales and accounts receivable in the daily reports Taurus was required to present to the bank.79 Shortly after the fraud was exposed, Taurus was pushed into a Chapter 7 liquidation.80 In filing its complaint against Ernst & Young, the trustee alleged that the auditor was negligent in failing to include a going-concern qualification in the audit report for the 1995 fiscal year.81 Using expert evidence, the trustee argued that had the going-concern qualification been included in the report, the owners of the company (who also acted as the managers) would have realized the company could not survive and would have immediately liquidated.82 An earlier liquidation, the trustee claimed, would have avoided the cost of operating under Bank One’s restrictions—to the tune of $3 million dollars.83 Ernst & Young moved for summary judgment in the United States District Court for the Southern District of Indiana, which was granted on its behalf.84 The trustee then appealed to the Seventh Circuit.85 Judge Richard A. Posner wrote the court’s opinion in Fehribach, which was decided by the Seventh Circuit on July 17, 2007.86 The alleged claims of negligence and breach of contract were governed by Indiana’s Accountancy Act of 2001.87 The Seventh Circuit classified the trustee’s theory of damages in the case as one based on the controversial “deepening insolvency” theory.88 While recognizing that the theory of deepening insolvency could be invoked in certain
79 Id. Taurus’s Chief Financial Officer, Lisa Corry (who was also the daughter of one of Taurus’s owners) was convicted of fraud and sentenced to prison. Id. at 908 (citing United States v. Corry, 206 F.3d 748 (7th Cir. 2000). 80 Id. 81 Id. 82 Id. 83 Id. 84 Id. at 907. 85 Id. 86 Id. at 905. 87 Id. at 907. 88 Id. at 908. 73
SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 cases—such as in a case where the management worked with the outsider to conceal the corporation’s decrepit financial status—the court noted that it did not make sense to hold a third party liable under the theory when the third party invested in the firm to keep it going and the investment was misused by management.89 The court also reconciled this case with its recognition of the deepening insolvency damages theory in its earlier decision in Schacht v. Brown.90 In that case, the court formulated the theory of deepening insolvency based on the notion that an insolvent corporation’s shareholders would be harmed through additional borrowing.91 “A puzzling suggestion,” the court reasoned, “because by hypothesis a company harmed by deepening insolvency was insolvent before the borrowing spree, so what had the shareholders to lose?”92 The court did recognize that a corporation could be insolvent in the traditional sense—as by being unable to pay its debts as they become due—but could still be worth more liquidated than the total of its liabilities so as to remain valuable to the shareholders—precisely the scenario the court assumed possible in Schacht.93 The court went on to say that Fehribach was different than other cases that could provide for damages based on deepening insolvency, because once Taurus became insolvent the owners lost their entire investments.94 Thus, there was nothing left for them to lose, and the only people that could be harmed by prolonging the corporation’s life were the creditors.95 Under Indiana law, which follows the privity rule of Ultramares, creditors without any contractual relationship to the auditor—which was the case with Taurus’s creditors—cannot file suit against the third party auditor.96 The court recognized that Taurus could sue Ernst & Young, because it was the corporation that had the
89 Id. at 908-9. 90 Id. at 908. See also Schacht v. Brown, 711 F.2d 1343 (7th Cir. 1983). 91 Fehribach, 493 F.3d at 908 (citing Schacht, 711 F.2d at 1350). 92 Id. at 908. 93 Id. (citing Schacht, 711 F.2d at 1348). 94 Id. at 909. 95 Id. 96 Id. 74
SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 contractual relationship with the auditor.97 Realistically, the court acknowledged that any suit brought by the bankrupt Taurus would in effect be brought for the benefit of its creditors. However, rather than expressly stating the trustee lacked standing, the court decided that the trustee’s claim failed on the facts regardless of how the standing issue was resolved.98 The fact that Taurus survived for more than a year after the audit provided by Ernst & Young was conducted was not central to the resolution of the case.99 Rather, the court categorized a going-concern qualification as a prediction, which may have to include items in the audit report that would result to foreseeable harm to the company if omitted.100 The point of an audit, the court noted, is for the auditing firm to look at the corporation’s financials, which are provided by the corporation, and make sure that they correspond to reality.101 Ernst & Young did not find any discrepancies between Taurus’s financials and its actual financial state because no such discrepancies existed.102 The court commented that Ernst & Young did fail to include a warning about the trends toward nationalization in the frozen food market but also stated that predicting Taurus’s cash flow beyond its financial statements was outside the purpose of the audit report.103 The court noted that “an auditor’s duty is not to give business advice; it is merely to paint an accurate picture of the audited firm’s financial condition, insofar as the condition is revealed by the company’s books and inventory and other sources of an auditor’s opinion.”104 The court did note that the auditor has a duty to follow accounting standards; in other words, it must be alert to certain conditions that would prevent the company from continuing as a going concern when considered in the aggregate.105 These conditions include: negative
97 Id. 98 Id. 99 Id. at 910. 100 Id. 101 Id. 102 Id. 103 Id. 104 Id. 105 Id. at 910-11. 75
SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 trends, other indications of financial difficulties (defaults on loan agreements, restructuring of debt, need to seek new sources of financing, etc), internal matters such as work stoppages and other labor difficulties, and external matters that have occurred such as legal proceedings or loss of a key franchise.106 However, “nowhere is the auditor required to investigate external matters, as distinct from discovering them during the engagement.”107 Therefore, the court focused on the fact that Ernst & Young was not hired to assess the projected supply and demand for the industry, and it was impossible for Ernst & Young to know more about trends in the frozen food market than Taurus did itself.108 Relying on those facts, the court held that Ernst & Young was not liable to Taurus’s creditors for the losses the company suffered from the prolonged liquidation.109 The court went on to note that not only was it possible to find for Ernst & Young on the merits, but the trustee’s claim was also barred by the one year statute of limitations in the Accountancy Act.110 Judge Rovner concurred in the opinion, stating that she would have limited the decision to whether the action was brought within the statute of limitations and would have barred the action on that issue alone.111
B. The HA2003 Liquidating Trust v. Credit Suisse Securities (USA) LLC
The HA2003 Liquidating Trust v. Credit Suisse Securities (USA) LLC involved a trust’s attempt to collect—for the sake of creditors— from the debtor’s investment banker, Credit Suisse First Boston (now Credit Suisse Securities) (“Credit Suisse”).112 HA-LO Industries (“HA-LO”) manufactured and sold promotional products bearing
106 Id. at 911. 107 Id. 108 Id. 109 Id. 110 Id. at 911-12. 111 Id. at 913. 112 517 F.3d 454 (7th Cir. 2008). 76
SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 company logos for employees and advertising purposes.113 In the 1990s, HA-LO considered expanding its business into the e-commerce realm instead of focusing solely on traditional sales methods.114 In 1999, John Kelley, HA-LO’s Chief Executive Officer decided that purchasing Starbelly.com, Inc. (“Starbelly”) was the most promising method of breaking into the e-commerce arena.115 Starbelly was a start-up company that was eating through its venture capital at a rate of $3 million per month and had yet to make a sale.116 Obviously, the proposition was risky, but Kelley had faith in Starbelly’s e-commerce system.117 HA-LO enlisted the help of Credit Suisse as an investment banker and Ernst & Young as a business consultant in connection with its anticipated acquisition of Starbelly.118 Along with renegotiating the price of the sale and working out a pay structure to avoid placing HA- LO in violation of its loan covenants, Credit Suisse also issued a fairness opinion representing that as of the date of the opinion (January 17, 2000), “the Merger Consideration is fair to HA-LO from a financial point of view.” 119 The fairness opinion issued by Credit Suisse and its engagement letter with HA-LO both specified that it had relied on—but not verified—HA-LO’s financial projections.120 Verification of the financial projections was left up to Ernst & Young, which informed Kelley that Starbelly would not generate nearly the
113 Id. at 455. 114 Id. 115 Id. 116 Id. 117 Id. 118 Id. 119 Id. at 455-56. Fairness opinions can be issued in a number of significant corporate transactions and are most often issued to a company’s board of directors when that company is selling itself or acquiring another company. Tariq Mundiya, Fairness Opinions: Courts Scrutinize the Role of Investment Banks, 5/29/2008 N.Y.L.J. 5, (col. 1) (2008). 120 HA2003 Liquidating Trust, 517 F.3d at 456.
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SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 amount of revenue he had projected.121 Kelley, however, refused to accept the more realistic projections provided by Ernst & Young.122 In April of 2000, HA-LO sent its shareholders a proxy solicitation, which included the fairness opinion issued by Credit Suisse. HA-LO’s investors approved the merger, and the deal was closed in May 2000.123 Shortly thereafter, HA-LO entered a tumultuous financial period triggered both by the large cash payout to Starbelly and Starbelly’s continuing losses.124 In January 2001, HA- LO entered bankruptcy.125 After HA-LO reorganized, a successor emerged, as well as a liquidating trust. 126 The trust, known as HA2003 Liquidating Trust, was set up to collect from anyone associated with HA-LO’s failed transactions and to distribute the proceeds to HA-LO’s pre-bankruptcy creditors.127 The trust filed a complaint against Credit Suisse alleging the investment banker was grossly negligent in preparing its fairness opinion.128 After a bench trial in the U.S. District Court for the Northern District of Illinois, the court found that Credit Suisse was not grossly negligent in preparing its fairness opinion; the trust appealed to the Seventh Circuit.129 The case was decided on February 20, 2008 with an opinion issued by Chief Judge Frank Easterbrook.130 The court noted that the district court had found that it could not label the investment bank’s behavior grossly negligent because it was only doing what its contract with HA-LO required it to do.131 The district court also found that HA-LO’s Chief Executive Officer and board members knew
121 Id. 122 Id. 123 Id.; A proxy solicitation is defined as a “request that a corporate shareholder authorize another person to cast the shareholder’s vote at a corporate meeting.” BLACK’S LAW DICTIONARY (8th ed. 2004). 124 HA2003 Liquidating Trust, 517 F.3d at 456. 125 Id. 126 Id. 127 Id. 128 Id. 129 Id. 130 Id. at 455. 131 Id. at 456. 78
SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 everything they accused Credit Suisse of ignoring, which would make assessing damages impossible.132 On appeal, the Seventh Circuit reviewed these factual findings using a clearly erroneous standard, which the court concluded was not met.133 Although the trust urged the court to consider whether fairness opinions were just “worthless (but expensive) paper,” the court refused to be pulled into the debate, finding that the question had no bearing on the outcome of the case.134 The court did state that requiring investment banks to treat fairness opinions as insurance would only raise the price of these decisions, thereby having a detrimental effect on the market.135 Such insurance, the court reasoned, would be cheaper when achieved through the stock market and the ability of investors to diversify their holdings.136 The Seventh Circuit is known for seizing the opportunity to promote the free market in its decisions, and its line of rationale discussing the “efficient market” in The HA2003 Liquidating Trust does not differ in that regard.137 While the court took the chance to discuss market principles, its decision to not hold Credit Suisse liable primarily relied on the fact that the financial adviser not only acted according to normal business standards but, more importantly, had performed its contract with HA- LO to the letter.138 Credit Suisse relied on the numbers provided by HA-LO in formulating its fairness opinion, and though those numbers may have been wrong, Credit Suisse did not have the duty to ensure their accuracy.139 That task was left up to (and completed by) Ernst & Young.140 It was HA-LO’s choice to not provide Credit Suisse with
132 Id. at 456-57. 133 Id. at 457. The clearly erroneous standard requires that a reviewing judge have a “definite and firm conviction” that an error was committed. Dickinson v. Zurko, 527 U.S. 150 (1999). 134 HA2003 Liquidating Trust, 517 F.3d at 457. 135 Id. at 458. 136 Id. 137 Dominic J. Campisi, Representing Estate and Trust Beneficiaries and Fiduciaries, SP004 ALI-ABA 1, 10-11 (2008). 138 HA2003 Liquidating Trust, 517 F.3d at 457. 139 Id. 140 Id. 79
SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 those numbers but instead to ask the investment bank to tender the fairness opinion using numbers generated by HA-LO itself.141 The trust also argued that Credit Suisse should have foreseen the end of the dot-com boom, an argument the court deemed an “appeal to hindsight.”142 The court went on to say that if everyone knew the dot- com boom was ending, as the trust asserted, then Credit Suisse had no duty to revise its opinion as the trust argued it should have done.143 Not only would have it been unnecessary to restate what the investing public could clearly see, but Credit Suisse was hired to deliver an opinion as of one date, which is exactly what it did.144 Finally, the trust asked the court to throw out the contract between the parties and impose a separate set of duties on Credit Suisse.145 The court refused to do so, citing the principle that, “[i]ntelligent adults can enforce their own standards of performance, and courts must enforce the deal they have struck.”146 The Seventh Circuit, therefore, reached the same general conclusion as in Fehribach—that the third party professional was not liable—by tailoring its focus to the contract between the parties as that contract was written.147
C. Joyce v. Morgan Stanley & Co., Inc.
In the last of the trilogy of cases, Joyce v. Morgan Stanley & Co., Inc., the shareholders and option holders brought suit against the business’s financial advisor for constructive fraud stemming from the advisor’s failure to address ways to hedge their risks.148 Edward T.
141 Id. 142 Id. at 458. 143 Id. 144 Id. 145 Id. 146 Id. 147 Id. at 459. 148 538 F.3d 797 (7th Cir. 2008). Hedging entails the “use of two compensating or offsetting transactions to ensure a position of breaking even; to make advance arrangements to safeguard oneself from loss on an investment, speculation, or bet.” BLACK’S LAW DICTIONARY (8th ed. 2004). 80
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Joyce and the other plaintiffs were shareholders and option holders in 21st Century Telecom Group (“21st Century”).149 On December 12, 1999, 21st century entered into a merger agreement with RCN Corporation (“RCN”) whereby RCN would acquire all of 21st Century’s common stock.150 Morgan Stanley advised 21st Century in connection with the merger.151 Unfortunately for the shareholders, between the date of the merger agreement and the effective date of the merger in April of 2000 RCN’s stock value plummeted.152 The newly acquired stock ended up worthless.153 The shareholders filed suit against Morgan Stanley alleging constructive fraud on the part of the financial advisor.154 This fraud, the shareholders claimed, stemmed from Morgan Stanley’s failure to advise them how to minimize their exposure to any potential decline in the value of the RCN stock.155 Morgan Stanley filed a motion to dismiss based on an alleged lack of standing, failure to state a claim, and failure to sue within the statutory limitation period, which the U.S. District Court for the Northern District of Illinois granted.156 The shareholders appealed to the Seventh Circuit.157 Judge Diane P. Wood issued the court’s opinion in Joyce, which was decided on August 19, 2008.158 The decision held that debtor’s financial advisor, Morgan Stanley, could not be held liable to 21st Century’s stockholders and option holders under a constructive fraud theory.159 The court began by stating that the shareholders did have
149 Joyce, 538 F.3d at 799. 150Id. Common stock is “a class of stock entitling the holder to vote on corporate matters, to receive dividends after other claims and dividends have been paid (esp. to preferred shareholders), and to share in assets upon liquidation.” BLACK’S LAW DICTIONARY (8th ed. 2004). 151 Joyce, 538 F.3d at 799. 152 Id. 153 Id. 154 Id. at 800. 155 Id. at 799. 156 Id. 157 Id. 158 Id. at 799. 159 Id. at 802. 81
SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 standing to bring the suit because their claims were direct rather than derivative.160 The shareholders alleged that their losses were based on a failure to hedge rather than a drop in stock prices.161 21st Century as a corporation did not suffer any loss related to the lack of hedging advice because 21st Century did not receive any RCN stock in the transaction.162 The court stated that while it was willing to acknowledge that the shareholders had standing to bring the action, the real issue turned on whether Morgan Stanley had a duty to give hedging advice.163 Considering the issue of whether Morgan Stanley had a duty to give hedging advice was imperative to the resolution of the shareholders’ constructive fraud claims.164 Constructive fraud differs from actual fraud in that it does not require actual dishonesty or the intent to deceive; rather, the law imposes liability simply because of the act’s tendency to deceive.165 The claim of constructive fraud requires either a confidential or a fiduciary relationship between the parties.166 In their complaint, the shareholders asserted that they had a confidential relationship with Morgan Stanley, and that Morgan Stanley did in fact owe them a fiduciary duty.167 The shareholders alleged that the fairness opinion provided by Morgan Stanley constituted a breach of that fiduciary duty because it was not based on an independent investigation, it failed to address the risks associated with the transactions, and it did not identify the ways the shareholders could hedge those risks to minimize losses.168
160 Id. at 799-800. A direct claim may be brought when the shareholder suffers a harm that is separate and distinct from the harm suffered by the corporation. The claim is derivate when the harm to the shareholder is shared by the corporation. 18 C.J.S. Corporations §485 (2008). 161 Joyce, 538 F.3d at 800. 162 Id. 163 Id. 164 Id. 165 Id. 166 Id. 167 Id. 168 Id. at 801. 82
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The shareholders also alleged a conflict of interest based on the fiduciary duty they claimed Morgan Stanley owed them.169 This conflict, the shareholders claimed, arose from the fact that Morgan Stanley had previously advised RCN in connection with the merger—a fact that was disclosed to the shareholders in Morgan Stanley’s engagement letter.170 Finally, rather than ask the court to find that the alleged breach of duty lie in the fairness opinion, the shareholders asked the court to look beyond the terms of that opinion (and beyond what was alleged in their complaint) to find that Morgan Stanley owed them an extra-contractual duty to provide advice relating to hedging strategies.171 The extra-contractual duty, the shareholders contended, arose out of the special circumstances surrounding the relationship between the parties. 172 The court rejected each of the above arguments made by the shareholders.173 First, the court acknowledged that 21st Century was willing to engage Morgan Stanley despite the fact that it knew the firm had previously advised RCN.174 This willingness, the court suggested, actually indicated that 21st Century was hoping a breach of fiduciary duty by Morgan Stanley would cut in its favor—as 21st admitted it hired the firm even though it knew Morgan Stanley had a substantial amount of knowledge concerning RCN’s business and capital structure.175 The court determined, however, that 21st Century’s motivations for engaging RCN were irrelevant, as the allegations that Morgan Stanley breached its duty to the shareholders were the focus of the case.176 In determining whether a breach of duty occurred, the court reasoned that even if it chose to overlook the fact that this extra-
169 Id. 170 Id. Morgan Stanley discontinued providing services to RCN when it began advising 21st Century in connection with the proposed merger. Id. 171 Id. 172 Id. 173 Id. at 801-02. 174 Id. at 801. 175 Id. 176 Id. 83
SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 contractual duty was not pleaded in the complaint, the shareholders could not show that special circumstances existed that would give rise to that duty.177 One necessary circumstance is that the allegedly superior party must have accepted the duty to protect the interests of the dependent party.178 The court noted that no such evidence existed to suggest that Morgan Stanley accepted this duty on behalf of the shareholders.179 In fact, Morgan Stanley’s engagement letter specified that the advisor was working only for the corporation.180 The court compared this case to The HA2003 Liquidating Trust because “[wishing] that a different contract had been written is not a basis for liability.”181 Finally, the court noted that it could have also upheld the district court’s judgment based on the shareholder’s failure to sue within the statutory limitations period.182 The shareholders should have been put on notice that they needed to investigate whether they were wrongfully deprived of the means needed to prevent their losses on the effective date of the merger agreement.183 Investigating whether hedging strategies were available would have taken little effort on the shareholders part, and because the standard for knowledge is objective rather than subjective, the shareholders could not claim that the statute of limitations period was triggered at the moment they learned of the availability of hedging strategies rather than the moment they learned they had experienced a loss.184
177 Id. at 802. 178 Id. 179 Id. 180 Id. 181 Id. 182 Id. at 803. 183 Id. 184 Id. 84
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IV. THE SEVENTH CIRCUIT: HEADED IN THE RIGHT DIRECTION BUT IN NEED OF A STRAIGHTER PATH
A. Fehribach, The HA2003 Liquidating Trust, and Joyce Were Correctly Decided
The Seventh Circuit’s recent decisions in Fehribach, The HA2003 Liquidating Trust, and Joyce are a step in the right direction when applied to the question of how far to extend liability for a debtor’s pre-bankruptcy professionals. This trilogy indicates that the Seventh Circuit is reluctant, or even unwilling, to extend liability to these professionals absent any specific misconduct on their part.185 These decisions were careful not to shut out the possibility for professional liability based on a standing issue alone—such as whether there was privity of contract or a duty owed by the professional to a third party.186 Failing to consider the merits of these cases and disposing them on a lack of standing alone would have been nonsensical. As the court noted in Fehribach, Taurus, the bankrupt company, obviously had standing to sue its pre-bankruptcy professionals because of the contractual relationship it shared with those professionals.187 If Taurus would have been solvent at the time it was injured by the auditing firm’s alleged negligence any suit brought against the auditor would have been brought for the benefit of its shareholders—even though the shareholders themselves could not have sued the auditor.188 The court went on to state that while it was true that Ernst & Young had no duty to Taurus’s creditors, it did have a duty to Taurus—a duty that did not evaporate because Taurus was bankrupt, and it was its creditors who would receive the benefit from a
185 See Fehribach v. Ernst & Young, LLP, 493 F.3d 905 (7th Cir. 2007)(Rovner, J., concurring); HA2003 Liquidating Trust v. Credit Suisse Securities (USA) LLC, 517 F.3d 454 (7th Cir. 2008); Joyce v. Morgan Stanley & Co.,,538 F.3d 797 (7th Cir. 2008). 186 See Fehribach, 493 F.3d at 909 (“The trustee’s claim fails nevertheless, but fails on the facts”). 187 Id. at 909. 188 Id. 85
SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 successful suit.189 By this rationale, the court’s decision to not dispose of any of the aforementioned cases on lack of standing alone was the logical approach. Also, it should be noted that in Fehribach the court was dealing with the strict privity rule espoused by Ultramares, yet it still chose to reach a decision on the merits.190 Although Fehribach, The HA2003 Liquidating Trust, and Joyce were decided on the merits, two of these cases—Fehribach and Joyce—could have been resolved by simply holding that the suits were not brought within the statutory limitations period.191 The fact that the court decided to discuss the merits of each of these cases before holding that the actions were also barred by the statute of limitations indicates that the court wanted to use these cases to espouse its general views regarding the extension of liability to outside professionals. In doing so, the court acknowledged its unwillingness to hold professionals liable for actions that were not required by their engagement letters—without shutting out the possibility that such an action could exist.192 The court, however, could have devised an analytical framework that would have made its inquiries into the facts of each case much simpler.
B. The Three Prong Test for Equitable Subordination as a Guideline for Devising an Efficient Analytical Framework for Professional Liability Claims
It is possible to formulate an initial analytical framework for determining whether these professionals can be held liable for the services they rendered to a debtor pre-bankruptcy—whether the suit is
189 Id. 190 Id. 191 493 F.3d at 911; 538 F.3d at 803. 192 Compare HA2003 Liquidating Trust, 517 F.3d 454, 458 (7th Cir. 2008) (“The engagement contract says CSFB has no duty to double-check the predictions. . .CSFB did what it was hired to do), with Fehribach, 493 F.3d at 910 (“The requirement that the auditor disclose in its report any substantial doubt it has that the firm will still be a going concern in a year expands the auditor’s duty beyond that of verifying the accuracy of the company’s financial statements”). 86
SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 brought under a fraud, negligence, or deepening insolvency damages theory. Furthermore, the rule utilized should be similar to a rule applied in a different context—to the question of whether a lender’s claim can be equitably subordinated.193 In considering whether a claim can be equitably subordinated, the Seventh Circuit —as well as other circuits—follows a three-prong balancing test that considers whether: “(1) the claimant creditor has engaged in some sort of inequitable misconduct; (2) the misconduct has resulted in an injury to other creditors or an unfair advantage to the miscreant; and (3) subordination of the debt is inconsistent with the other provisions of the bankruptcy code.”194 While some courts have held that inequitable conduct is not required for subordination, such conduct is a requirement when attempting to subordinate the claims of a secured lender.195 Generally, financial lending institutions do not owe a duty to their borrowers; however, an exception to this rule exists when the lending institution exerts “dominion or control” over the debtor.196 A close relationship between the lender and the debtor is not considered sufficient; the lender must exercise enough control over the debtor to both influence corporate policy and the disposition of assets.197 Thus, a lender’s claim will not be equitably subordinated unless it is proven that the lender actually controlled the debtor.198 Applying the aforementioned rule as an initial step to determining the potential liability of a debtor’s pre-bankruptcy professionals would
193 Equitable subordination represents the power of the bankruptcy court under § 510(c) of the Bankruptcy Code to reprioritize claims in a bankruptcy case if the court determines the claimant has engaged in misconduct that either injures other creditors or confers on unfair advantage on the claimant. In re Kreisler, 2008 WL 4613880 *864, *866 (7th Cir.). See also 11 U.S.C. § 510(c) (2008). 194 Official Committee of Unsecured Creditors v. Citicorp North America (In re Aluminum Mills Corp.), 132 B.R. 869, 893 (N.D. Ill. 1991) (citing the three prong balancing test of In re Mobile Steel Co., 563 F.2d 692, 702 (5th Cir. 1977). 195 Aluminum Mills, 132 B.R. at 893. 196 Id. at 894. 197 Id. 198 See id. 87
SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 establish a bright line rule for creditor’s claiming they were owed duties outside of the scope of what was required in their engagement letters—professionals will not be liable for the alleged negligence unless they exercised control over the debtor that amounted to a dictatorship over corporate policy.199 This test would be easier to apply than and would eliminate the need for the court’s current approach of looking at each case on a fact by fact basis to determine liability for whether fairness opinions should have amended, or market trends and other external factors should have been considered, or numbers should have been verified. The test would also create a balance by ensuring that outside professionals are held accountable for their actions when exerting control over the debtor—a balance that will not be achieved by simply inquiring into whether an engagement letter required a specific action. As further support, the proposed test falls squarely in line with the Seventh Circuit’s reasoning against finding lender liability in the context of equitable subordination. For example, in Kham & Nate’s Shoes No. 2, Inc. v. First Bank of Whiting, the court noted the general lack of cases subordinating the claims of creditors that dealt only at arm’s length with the debtor.200 The debtor in Kham urged the court to find that the lender’s conduct could be inequitable even though the lender had complied with all of its contractual obligations.201 The court rejected this argument, stating they were “not willing to embrace a rule that requires participants in commercial transactions not only to keep their contracts but also do ‘more’—just how much more resting in the discretion of a bankruptcy judge assessing the situation years later.”202 Surely, the rule proposed in this Article would take any discretion out of the hands of a bankruptcy judge as to whether a professional without control over the debtor was required to do
199 Of course, if the alleged negligence or breach lies within the performance of duties required by the professional’s engagement letter then the claims should be analyzed in accordance with the elements of standard tort and contract claims. 200 908 F.2d 1351, 1356 (7th Cir. 1990). 201 Id. 202 Id. 88
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“more”—an outcome that would seem welcomed by the Seventh Circuit.
CONCLUSION
The Seventh Circuit rightfully concluded that an outside professional was not liable for the bankruptcy or financial loss of the company it advised in Fehribach, The HA2003 Liquidating Trust, and Joyce. The plaintiffs in each of these cases were only seeking, as Chief Judge Easterbrook put it, “a deep pocket to reimburse investors for the costs of managers’ blunders.”203 These plaintiffs brought suit against the professionals based on claims for breach of contract, negligence, constructive fraud, and under the deepening insolvency damages theory—all common theories of liability that professionals are sued under throughout other circuit and lower federal courts. The Seventh Circuit did not expressly state that the third party plaintiffs lacked standing to bring any of the claims; rather, the court decided each case on the merits. In doing so, the court rejected each claim brought against the professionals in all three cases on a fact by fact basis. The court’s failure to outline a general analytical framework in any of its decisions, however, will surely lead to the exercise of judicial direction as to whether these professionals can be held liable. A clear rule is necessary to simplify the liability question for these professionals in the Seventh Circuit as well as in the other circuit courts and lower federal courts. The imperativeness of such a rule is especially apparent in the current economic climate—where management in a number of industries has been blamed for their respective industry’s collapse or potential collapse.204 If these
203 HA2003 Liquidating Trust v. Credit Suisse Securities (USA) LLC, 517 F.3d 454, 457 (7th Cir. 2008). 204 See Mitt Romney, Let Detroit Go Bankrupt , NEW YORK TIMES, Nov. 19, 2008, available at http://www.nytimes.com/2008/11/19/opinion/19romney.html?_r=1 (“don’t ask Washington to give shareholders, , .a free pass—they bet on management and they lost”); Julie Hirschfield Davis, Lehman’s Golden Parachutes Were Being Secured While Execs Were Pleading for Federal Rescue, THE HUFFINGTON POST, Oct. 6, 89
SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 industries do fail, there is always the possibility that their creditors will go after the outside professional advisors as a means of recovery. A clear cut rule delineating when these advisors can be held liable would eliminate the need for the federal courts to examine each case on a fact by fact basis to determine what actions, if any, the advisor could have taken on behalf of the struggling business and whether they were actually obligated to take those actions irrespective of whether their engagement letters required it. The rule used for determining when these professionals can be held liable should be similar to the rule applied to the question of whether a secured lender’s claim can be equitably subordinated. In other words, plaintiffs alleging that a professional should have done more to warn them about the financial condition of the business the professional advised should first be required to prove that the professional exercised control over the debtor. Such a rule would not only ensure that professionals performing their contractual duties to the letter would not be held liable by third parties seeking a deep pocket, but it would also balance the detrimental effects of holding that a professional is not liable for actions not required by their engagement letter when that professional was exercising actual control over the debtor.
2008, http://www.huffingtonpost.com/2008/10/06/lehmans-golden- parachutes_n_132258.html (“culture of entitlement” among Lehman management); Peter Whoriskey, AIG Spa Trip Fuels Fury on Hill, WASHINGTON POST, Oct. 8, 2008, available at http://www.washingtonpost.com/wp- dyn/content/article/2008/10/07/AR2008100702604_pf.html (a week before former AIG CEO told investors company was confident in their valuation methods, Pricewaterhouse Coopers, AIG’s auditor, had warned them that they could have a material weakness in that area). 90
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ANALYZING A PRETRIAL DETAINEE’S § 1983 CLAIMS UNDER THE DELIBERATE INDIFFERENCE STANDARD AMOUNTS TO PUNISHMENT OF THE DETAINEE
* LESLIE B. ELKINS
Cite as: Leslie B. Elkins, Analyzing a Pretrial Detainee’s § 1983 Claims Under the Deliberate Indifference Standard Amounts to Punishment of the Detainee, 4 SEVENTH CIRCUIT REV. 91 (2008), at http://www.kentlaw.edu/7cr/v4-1/elkins.pdf.
INTRODUCTION
While the Eighth Amendment holds that a convicted inmate may be punished if that punishment is not “cruel and unusual,”1 due process requires that a pretrial detainee not be punished at all.2 Because pretrial inmates are “presumed to be innocent and held only to ensure their presence at trial, ‘any deprivation or restriction of . . . rights beyond those which are necessary for confinement alone, must be justified by a compelling necessity.’”3 Historically, imprisonment was not actually punishment but existed only for the safe custody of the accused until the administration of corporal or capital punishment.4 Blackstone explains, in the “dubious interval between the commitment and trial, a prisoner ought to be used with
* J.D. candidate, May 2009, Chicago-Kent College of Law, Illinois Institute of Technology; B.A., May 2006, University of Illinois, Urbana-Champaign. 1 U.S. CONST. amend. VIII. 2Ingraham v. Wright, 430 U.S. 651, 671 n.40 (1977). 3 Bell v. Wolfish, 441 U.S. 520, 528 (1979) (citing United States ex rel. Wolfish v. Levi, 439 F. Supp. 114, 124 (S.D.N.Y. 1997)). 4 4 WILLIAM BLACKSTONE, COMMENTARIES *300.
91 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 the utmost humanity; and . . . no[t] subjected to other hardships than such as are absolutely requisite for the purpose of confinement only . . .”5 Although today imprisonment is now one of the more common forms of punishment for crime,6 pretrial detention is still common practice.7 Accordingly, the rationale for pretrial detention still holds today; pretrial detention exists to ensure the detainee’s presence at trial and to maintain his safety as well as society’s safety in the meantime.8 If the goal of detaining pretrial inmates is to ensure their safety and presence at trial, a failure to protect them from other prisoners serves to destroy that rudimentary purpose. By scrutinizing the way courts assess pretrial detainees’ claims against prison officials under 42 U.S.C. § 1983 (“§ 1983”), this article will demonstrate that pretrial detainees are essentially being punished in violation of the Constitution. For such claims, the circuit courts no longer differentiate between pretrial detainees and convicted prisoners.9 A long line of Seventh Circuit cases analyzing pretrial detainees’ § 1983 claims against prison officials illustrate that courts
5 Id. 6 Malcolm E. Wheeler, Toward a Theory of Limited Punishment: An Examination of the Eighth Amendment, 24 STAN. L. REV. 838, 838 (1972); Daniel E. Hall, When Caning Meets the Eighth Amendment: Whipping Offenders in the United States, 4 WIDENER J. PUB. L. 403, 455 (1995). 7 Candace McCoy, Caleb Was Right: Pretrial Decisions Determine Mostly Everything, 12 BERKELEY J. CRIM. L. 135, 139 (2007). 8 In the Bail Reform Act of 1966, Congress held that a person is committed to a detention facility only because no other less drastic means can reasonably ensure his presence at trial. Additionally, pretrial bail may not be used as a device to protect society from the possible commission of additional crimes by the accused. Bail Reform Act of 1966, 18 U.S.C §§ 3146–3152 (1982), repealed in part by Bail Reform Act of 1984, 18 U.S.C. §§ 3141–3150 (Supp. IV 1986). However, Congress later created the Bail Reform Act of 1984 as part of the Comprehensive Crime Control Act of 1984. Id. In addition to allowing pretrial detention as a device to ensure the detainee’s presence at trial, the Bail Reform Act of 1984 permits pretrial detention if after a hearing pursuant to a government motion, a judicial officer “finds that no condition of combination of conditions will reasonably assure . . . the safety of any other person and the community.” Bail Reform Act of 1984, 18 U.S.C. § 3142(e) (Supp. IV 1986). 9 Klebanowski v. Sheahan, 540 F.3d 633, 634 (7th Cir. 2008).
92 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 have forgotten that “the state does not acquire the power to punish . . . until after it has secured a formal adjudication of guilt.”10 Supreme Court law mandates that a pretrial detainee’s rights are “at least as great” as a convicted prisoner’s rights.11 However, the Seventh Circuit’s recent decision, Klebanowski v. Sheahan, illustrates that the current analysis of a pretrial detainee’s § 1983 claim against a prison official for failure to safeguard inmates from other inmates replicates the analysis given to an identical claim by a convicted prisoner.12 Part I of this article discusses prisoners’ § 1983 claims against prison officials. First, it explains the evolution of “deliberate indifference” as the standard to evaluate convicted prisoners’ § 1983 claims against prison officials. Next, this article introduces Bell v. Wolfish where the Court declared that the rights of pretrial detainees are “at least as great” as convicted prisoners’ rights. Part II illustrates the circuit courts’ interpretation of how to analyze pretrial detainees’ § 1983 claims using the history of the analysis in the Seventh Circuit as an example. Finally, Part III discusses the problems of using the same standard on pretrial detainees and convicted prisoners. This article concludes that this trend amounts to the punishment of pretrial detainees before conviction in violation of the Due Process Clause.
I. § 1983 GIVES INMATES A CLAIM AGAINST PRISON OFFICIALS
Title 42 U.S.C. § 1983 provides a cause of action for any citizen deprived of any rights, privileges, or immunities secured by the Constitution and laws by a person acting under color of any statute, ordinance, regulation, custom, or usage of any State or Territory or the District of Columbia.13 Congress enacted § 1983 in 187114 as a means
10 Ingraham v. Wright, 430 U.S. 651, 671, n.40 (1977). 11 See Bell v. Wolfish, 441 U.S. 520, 545 (1979) (holding that “pretrial detainees, who have not been convicted of any crimes, retain at least those constitutional rights that we have held are enjoyed by convicted prisoners.”). 12 Klebanowski, 540 F.3d at 634. 13 42 U.S.C. § 1983 (2000). 14 15 AM. JUR. 2D Civil Rights § 62 (2008).
93 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 to enforce the provisions of the Fourteenth Amendment.15 Congress created the statute to provide citizens with a civil action against any misuse of power by a state actor given by the authority of the state.16 Supreme Court precedent requires prison officials to protect both convicted inmates and pre-trial detainees from violence inflicted by other inmates.17 Convicted inmates’ § 1983 claims are analyzed under the Eighth Amendment’s Cruel and Unusual Punishment Clause whereas pretrial inmates’ § 1983 claims are analyzed under the Due Process Clause of the Fourteenth Amendment.18
A. The Evolution of “Deliberate Indifference” as the Standard to Evaluate Convicted Prisoners’ § 1983 Claims Against Prison Officials.
The treatment that convicted prisoners receive and the conditions of their confinement are subject to scrutiny under the Eighth Amendment.19 To make a § 1983 claim that a prison official violated an official duty, the injured inmate must prove two things: (1) “that the deprivation . . . [was], objectively sufficiently serious,”20 and (2) that the prison official had a “sufficiently culpable state of mind.”21 The Supreme Court describes this state of mind as “‘deliberate indifference’ to inmate health and safety.”22 The Supreme Court first employed the term “deliberate indifference” in 1976 while analyzing a claim about an inmate’s safety in Estelle v. Gamble.23 In Estelle, a 600-pound bale of cotton fell on a prisoner, causing pain and stress in his back.24 The petitioner filed a
15 Id. 16 Id. 17 Farmer v. Brennan, 511 U.S. 825, 833 (1994). 18 Bell v. Wolfish, 441 U.S. 520, 528 (1979). 19 Helling v. McKinney, 509 U.S. 25, 31 (1993). 20 Farmer, 511 U.S. at 834 (citing Wilson v. Seiter, 501 U.S. 294, 298 (1991)). 21 Id. 22 Id. (citing Wilson v. Seiter, 501 U.S. 294, 302–303 (1991)). 23 Estelle v. Gamble, 429 U.S. 97, 105 (1976). 24 Id. at 99.
94 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 pro se complaint against prison officials for a failure to provide him with adequate medical care.25 The Court explained that “deliberate indifference to serious medical needs of prisoners constitutes the ‘unnecessary and wanton infliction of pain,’ proscribed by the Eighth Amendment.”26 Therefore, the Court held, deliberate indifference to a prisoner’s serious illness or injury states a cause of action under § 1983.27 The Supreme Court further analyzed the objective component of a § 1983 claim in 1981 in Rhodes v. Chapman. In Rhodes, inmates brought a § 1983 claim against prison officials at the Southern Ohio Correctional Facility claiming that “double celling”28 constituted cruel and unusual punishment.29 The Court rejected petitioner’s claim based solely on the inadequacy of the objective component holding that “double celling” did not constitute cruel and unusual punishment.30 Ten years after Rhodes, the Court decided Wilson v. Seiter where it emphasized that Rhodes did not eliminate the subjective component of an Eighth Amendment § 1983 claim.31 In Wilson, the Court explained that § 1983 claims always require a subjective inquiry into the prison officials’ state of mind no matter the gravity of objective conditions.32 The Wilson Court explained that the “wantonness” of conduct depends on actions of the official, not the harm inflicted on the inmate.33 Additionally, the Court declared that Estelle’s “deliberate indifference” standard applies to all treatment received by prisoners, whether classified as “inhumane conditions of confinement, failure to
25 Id. at 97. 26 Id. (quoting Gregg v. Georgia, 428 U.S. 153, 173 (1976)). 27 Id. at 105. 28 “Double celling” occurs when two inmates are lodged in the same cell. 29 Rhodes v. Chapman, 452 U.S. 337, 344 (1981). 30 Id. 31 Wilson v. Seiter, 501 U.S. 294, 298 (1991) (citing Whitley v. Albers, 475 U.S. 312, 319 (1986) (holding that it is “obduracy and wantonness, not inadvertence or error in good faith, that characterize the conduct prohibited by the Cruel and Unusual Punishments Clause.”)). 32 Id. at 299-302. 33 Id. at 303.
95 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 attend to his medical needs, or a combination of both.”34 The Court additionally explained in Wilson that “the protection [an inmate] is afforded against other inmates” is a condition of confinement.35 Three years after the Wilson decision, in Farmer v. Brennan, the Supreme Court granted certiorari to determine an appropriate test to determine the meaning of “deliberate indifference.”36 In Farmer, a transsexual inmate alleged that federal prison officials violated the Eighth Amendment by showing deliberate indifference to his safety after he had been beaten and raped by another inmate.37 The inmate asserted that because of his appearance (he underwent estrogen therapy, received silicone breast implants, and “project[ed] feminine characteristics”) the respondents38 should have known that he would be a target for sexual attacks from other inmates.39 Before concluding that the prison officials did not show deliberate indifference to the inmate’s safety, the Court developed the test to determine when a prison official acts with “deliberate indifference.” Farmer’s test involves two parts. First, the “deprivation must be, objectively, sufficiently serious.40 The Court explained that “a prison official’s act or omission must result in the ‘denial of the minimal civilized measure of life’s necessities.’”41 For a claim based on a prison official’s failure to prevent harm,42 “the inmate must show that
34 Id. 35 Id. 36 Farmer v. Brennan, 511 U.S. 825, 832 (1994). 37 Id. at 829. 38 The respondents were the warden of USP-Terre Haute and the Director of the Bureau of Prisons (sued only in their official capacities), the warden of FCI- Oxford and a case manager there, and the Director of the Bureau of Prisons North Central Region Office and an official in that office (sued in their official and personal capacities). Id. at 831. 39 Id. at 830-831. 40 Id. at 834 (quoting Wilson v. Seiter, 501 U.S. 294, 298 (1991)). 41 Id. at 834 (quoting Rhodes v. Chapman, 452 U.S. 337, 347 (1981)). 42 The Court in Farmer did not address at what point a risk of inmate assault becomes sufficiently substantial for an Eighth Amendment violation because the case did not present that issue.
96 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 he is incarcerated under conditions posing a substantial risk of serious harm.”43 Second, the plaintiff must show that prison officials possessed “a sufficiently culpable state of mind.”44 The Court explained that Estelle established that “deliberate indifference” indicated “a state of mind more blameworthy than negligence.”45 The Court in Farmer expressed the opinion that “deliberate indifference” would fall between negligence and purpose or knowledge and acknowledged that the Courts of Appeal routinely equated “deliberate indifference” with recklessness.46 The Court explained that “recklessness” could signify either civil recklessness or criminal recklessness.47 Ultimately, the Court held that “deliberate indifference” likens with the more stringent standard, criminal recklessness, explaining that “the official must both be aware of facts from which the inference could be drawn that a substantial risk of serious harm exists, and he must also draw the inference.”48 The Court felt that this standard aligned best with the text of the Eighth Amendment.49 Farmer established that “deliberate indifference” is the test for convicted prisoners claiming a § 1983 claim brought pursuant to the Eighth Amendment against an official.50
43 Farmer, 511 U.S. at 834. 44 Id. (quoting Wilson v. Seiter, 501 U.S. 294, 297 (1991)). 45 Id. at 835 (citing Estelle v. Gamble, 429 U.S. 97, 104 (1976)). 46 Id. at 836. 47 Id. The Court explained that civil law generally calls a person reckless who acts or, if the person has a duty to act, fails to act in the face of an unjustifiably high risk of harm that is either known or so obvious that it should be known. In contrast, the criminal law generally permits a finding of recklessness only when a person disregards a risk of harm of which he is aware. 48 Id. at 839–840. 49 Id. at 837. 50 Id.
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B. Wolfish Holds that a Pretrial Detainee’s Rights Are “At Least as Great” as a Convicted Prisoner’s Rights; No Standard Announced to Evaluate a Pretrial Detainee’s § 1983 Claims Against Prison Officials.
The Supreme Court examined the constitutional rights of pretrial detainees in the 1979 decision, Bell v. Wolfish, where the Court declared that the constitutional rights of a pretrial detainee flow from the procedural and substantive due process guarantees of the Fourteenth Amendment.51 Wolfish was a class action lawsuit brought to challenge numerous conditions of confinement and practices at the Metropolitan Correctional Center, a federally operated short-term custodial facility in New York City designed primarily to house pretrial detainees.52 In Wolfish, the Court analyzed the constitutionality of conditions of pretrial detention and focused on “whether those conditions amount[ed] to punishment of the detainee.”53 The Court explained that “under the Due Process Clause, a detainee may not be punished prior to an adjudication of guilt.”54 The Court clarified that, “a person lawfully committed to pretrial detention has not been adjudged guilty of any crime. He has had only a ‘judicial determination of probable cause as a prerequisite to [the] extended restraint of [his] liberty following arrest.’”55 The Court explained that “if a restriction or condition [of pretrial detention] is not reasonably related to a legitimate goal—if it is arbitrary or purposeless—a court permissibly may infer that the purpose of the government action is punishment that may not constitutionally be inflicted upon detainees.”56
51 Bell v. Wolfish, 441 U.S. 520, 523 (1979). 52 Id. The facility also housed some convicted prisoners awaiting sentencing or transportation to another facility. Id. at 524. 53 Id. at 535. 54 Id. 55 Id. at 536 (quoting Gerstein v. Pugh, 420 U.S. 103, 114 (1975)). 56 Id. at 539.
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The Court explained that detainment obviously must interfere with the pretrial detainees’ desire to live as comfortable as possible.57 However, uncomfortable conditions do not amount to the punishment the Fourteenth Amendment prohibits.58 The Court in Wolfish looked to Kennedy v. Mendoza-Martinez where the Court described tests traditionally applied to determine whether a governmental act is punitive in nature.59 A court must look to see if a particular restriction that may appear to be punishment is instead a legitimate nonpunitive governmental objective.60 The Wolfish Court explained that “[r]estraints that are reasonably related to the institution’s interest in maintaining jail security do not, without more, constitute unconstitutional punishment, even if they are discomforting and are restrictions that the detainee would not have experienced had he been released while awaiting trial.”61 The Wolfish Court next explained that the proper inquiry involves the constitutionality of the restrictions at issue and explained that “[t]here is no iron curtain drawn between the Constitution and the prisons of this country.”62 Some protections that extend to convicted prisoners include the right to enjoy freedom of speech and religion under the First and Fourteenth Amendments;63 protection against invidious discrimination
57 Id. at 537. 58 Id. 59 Id. at 537-538. (citing Kennedy v. Mendoza-Martinez, 372 U.S. 144, 168 (1963)). In Kennedy, the Court explained the test as [w]hether the sanction involves an affirmative disability or restraint, whether it has historically been regarded as a punishment, whether it comes into play only on a finding of scienter, whether its operation will promote the traditional aims of punishment-retribution and deterrence, whether the behavior to which it applies is already a crime, whether an alternative purpose to which it may rationally be connected is assignable for it, and whether it appears excessive in relation to the alternative purpose assigned. Kennedy v. Mendoza-Martinez, 372 U.S. 144, 168 (1963). 60 Wolfish, 441 U.S. at 538. 61 Id. at 540. 62 Id. at 545 (quoting Wolff v. McDonnell, 418 U.S. 539, 555-556 (1974)). 63 Id. (citing Pell v. Procunier, 417 U.S. 817, 822 (1974)).
99 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 from the Equal Protection Clause;64 and the right to claim the protection of the Due Process Clause to prevent additional deprivation of life, liberty, or property without due process of law.65 The Court carefully clarified, however, that “simply because prison inmates retain certain constitutional rights does not mean that these rights are not subject to restrictions and limitations.”66 The Court then established that “pretrial detainees, who have not been convicted of any crimes, retain at least those constitutional rights that . . . are enjoyed by convicted prisoners.”67 The Court never conclusively established a test for pretrial detainees claiming a § 1983 action against prison officials for maltreatment. Thus, since Wolfish, courts have struggled to determine where pretrial detainees’ constitutional protection falls along the line of “at least as great” in such § 1983 claims.
II. THE CIRCUIT COURTS’ ANALYSIS OF PRETRIAL DETAINEES’ § 1983 CLAIMS.
Under Bell v. Wolfish, the Due Process rights of pretrial detainees are at least as great as the protections available to convicted prisoners under the Eighth Amendment.68 This “at least as great” mandate from Wolfish has led to some confusion in determining how to analyze § 1983 claims.69 The majority of circuit courts have settled on using
64 Id. (citing Lee v. Washington, 390 U.S. 333 (1968)). 65 Id. (citing Meachum v. Fano, 427 U.S. 215, 225 (1976)). 66 Id. 67 Id. (emphasis added). 68 Id. 69 In 1974, the Second Circuit explained that a pre-trial detainee is entitled to protection from cruel and unusual punishment as a matter of due process and, where relevant, equal protection. Rhem v. Malcolm, 507 F.2d 333, 337-38 (2d Cir. 1974). In 1978, the Second Circuit clarified that “pretrial detainees may be subjected to only those ‘restrictions and privations’ which ‘inhere in their confinement itself or which are justified by compelling necessities of jail administration.’’ Wolfish v. Levi, 573 F.2d 118, 124 (2d Cir. 1978). Other circuits held that the Eighth Amendment prohibition against cruel and unusual punishment, incorporated in the
100 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 the same deliberate indifference standard for § 1983 causes of action outlined for convicted prisoners under the Eighth Amendment on pretrial detainees’ due process claims.70 In the process of reaching the deliberate indifference standard, courts provide less and less reasoning to support using the same standard on pretrial detainees that is used for convicted prisoners.
A. Before Wolfish: the Circuit Courts Struggle to Determine the Appropriate Standard to Analyze Pretrial Detainees’ § 1983 Claims.
Before Bell v. Wolfish established that the protections afforded pretrial detainees are at least as great as those afforded convicted
Fourteenth Amendment applied to state treatment of pre-trial detainees. See e.g. Johnson v. Lark, F. Supp.289, 301-03 (E.D. Mo. 1973); Collins v. Schoonfield, 344 F. Supp. 257, 264-65 (D. Md. 1972). In 1977, the Fifth Circuit held that pretrial detention is only violative of the Due Process Clause when conditions placed on the detainee are more than what is necessary to assure the detainee’s presence at trial. Miller v. Carson, 563 F.2d 741, 750 (5th Cir. 1977). The Seventh Circuit used a similar standard, holding that “as a matter of due process, pre-trial detainees may suffer no more restrictions than are reasonably necessary to ensure their presence at trial.” Duran v. Elrod, 542 F.2d 998, 999 (7th Cir. 1978). 70 See, e.g. A.M. v. Luzerne County Juvenile Detention Center, 372 F.3d 572, 584 (3d Cir. 2004) (acknowledging that pretrial detainees claims are properly analyzed under the Fourteenth Amendment yet indicating that due process obligations with respect to medical care had not been defined by the Supreme Court and holding that what is clear is that detainees are entitled to no less protection than a convicted prisoner is entitled to under the Eighth Amendment); Hare v. City of Corinth, Miss. 74 F.3d 633, 643 (5th Cir. 1996) (adopting a standard of deliberate indifference for all pretrial detainee § 1983 claims); Estate of Moorland v. Dieter, 395 F.3d 747, 758 (7th Cir. 2005) (holding that the pretrial detainee’s unnecessary and excessive force due process claim falls within the Fourteenth Amendment, but applied the Eighth Amendment’s deliberate indifference standard since the court had previously analyzed such claims under that standard); Board v. Farnham, 394 F.3d 469, 478 (7th Cir. 2005) (finding it “convenient and entirely appropriate to apply the same standard to claims arising under the Fourteenth Amendment (detainees) and the Eighth Amendment (convicted prisoners));Cook v. Sheriff of Monroe County, 402 F.3d 1092, 1115 (11th Cir. 2005) (holding that in regard to providing pretrial detainees with basic necessities, the minimum standard allowed by the due process clause is the same as that allowed by the eighth amendment for convicted prisoners).
101 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 prisoners, courts had trouble determining how to analyze pretrial detainees’ § 1983 claims. Some circuits opposed the suggestion that claims from pretrial detainees should be analyzed the same as those from convicted felons.71 Some circuits applied the same “deliberately indifferent” standard outlined in Farmer.72 Some circuits avoided the question altogether while deciding their case.73 The Fourth Circuit attempted to create a specific analysis for pretrial detainees suggesting that “[t]he fourteenth amendment . . . must be read to recognize a distinct status of a pretrial detainee: a citizen not yet convicted, yet at the same time not possessing the full range of freedoms of an unincarcerated citizen.”74
B. Evolution of § 1983 Claims in the Seventh Circuit
The circuits generally apply the Eighth Amendment’s deliberate indifference standard to pretrial detainees. To understand an example of how the courts arrived on the standard, an illustration of the history of the Seventh Circuit’s analysis of pretrial detainees’ § 1983 claims follows.
71 See Johnson v. Glick, 481 F.2d 1028, 1033 (2d Cir. 1973) (announcing that the court had “considerable doubt that the cruel and unusual punishment clause is properly applicable at all until after conviction and sentencing” and that “it would be absurd to hold that a pretrial detainee has less constitutional protection against acts of prison guards” than a convicted prisoner); Norris v. Frame, 585 F.2d 1183, 1187 (4th Cir. 1978) (holding that the protection afforded convicted felons under the Eighth Amendment is useful by analogy, but the two levels of protection should not be thought of as co-extensive). 72 See Arroyo v. Schaefer, 548 F.2d 47, 50 (1977) (holding that “while the Eighth Amendment may not, strictly speaking, be applicable to pretrial detainees . . . due process requires no more in this context,” and applying the deliberate indifference standard). 73 Hampton v. Holmesburg Prison Officials, 546 F.2d 1077, 1079 (3d Cir. 1976) (reasoning that the facts of the case “mandate a finding that there has been no constitutional deprivation, whatever the derivation [of the right]”). 74 Id. at 1187.
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The Seventh Circuit once recognized that the due process clause did not require a showing of deliberate indifference.75 In 1982, in Kincaid v. Risk, the Seventh Circuit rejected the appellee’s assertion that Wolfish considered with Estelle indicated that pretrial detainees’ claims should be analyzed pursuant to the Eighth Amendment “deliberate indifference” standard.76 The court elaborated, “Estelle, which involved an eighth amendment claim by a convicted prisoner, is not directly relevant to the due process standard applicable to pretrial detainees as enunciated in Wolfish.”77 In 1988, the Seventh Circuit analyzed a pretrial detainee’s claim that prison guards allowed an impending attack from another inmate.78 In Anderson v. Gutschenritter, the Seventh Circuit explained that “[b]ecause there had been no formal adjudication of guilt against [the detainee] . . . the Eighth Amendment has no application. The due process rights of a person in [the detainee’s] situation are at least as great as the Eighth Amendment protections available to a convicted prisoner, and it is in this light that [the detainee’s] claim must be evaluated.”79 However, the Seventh Circuit did not explicitly state nor apply the Eighth Amendment’s “deliberate indifference” standard. Rather, the court found that a jury could have found in the detainee’s favor because “[t]he jury could have found that [the defendant] had shown indifference or a willingness to allow the attack.”80 The court overruled the district court, explaining that the jury could have inferred that the defendants “failed to protect [the detainee] after learning of a strong likelihood that [the detainee] would be assaulted.”81
75 Matzker v. Herr, 748 F.2d 1142, 1146 (7th Cir. 1984); Kincaid v. Rusk, 670 F.2d 737, 743 n.8 (1982). 76 Kincaid v. Rusk, 670 F.2d 737, 743 n.8 (1982). 77 Id. 78 Anderson v. Gutschenritter, 836 F.2d 346, 349 (7th Cir. 1988). 79 Id. 80 Id. 81 Id.
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1. “Deliberate indifference” is the appropriate standard for pretrial detainees’ § 1983 claims against prison officials
The Seventh Circuit settled on the “deliberate indifference” standard for pretrial detainees’ § 1983 claims against prison officials for failure to provide adequate medical care in 1991 in Salazar v. City of Chicago. In that case, the Seventh Circuit had to determine the standard that governs pretrial detainees’ claims for state officials’ failure to provide medical care.82 The Salazar court settled on the Eighth Amendment’s deliberate indifference standard using a similar reasoning process to the Supreme Court’s analysis in Farmer.83 The Salazar court rejected the plaintiff’s suggested standards of either negligence or gross negligence citing the Supreme Court’s decision in Davidson v. Cannon that declared that grossly negligent conduct did not implicate the due process clause.84 Accordingly, the Salazar court concluded that if gross negligence does not implicate the due process clause, neither will negligence since it is a lower standard than gross negligence.85 The Salazar court looked to its previous holding in Duckworth where it held that “deliberate indifference” means intentional or criminally reckless conduct.86 The Salazar court explained that “only intentional or criminally reckless conduct implicates the due process clause,87 and since ‘deliberate indifference’
82 Salazar v. City of Chicago, 940 F.2d 233, 238 (7th Cir. 1991). 83 Farmer was decided in 1994. Farmer v. Brennan, 511 U.S. 825 (1994). Thus, the reasoning was not borrowed. 84 Salazar, 940 F.2d at 238 (citing Davidson v. Cannon, 474 U.S. 344, 347-48 (1986)). 85 Id. 86 Duckworth v. Franzen, 780 F.2d 645, 648 (7th Cir. 1985). In Duckworth, twenty one prisoners brought a § 1983 claim against prison officials for injuries sustained from a bus fire. Id. Thirty five prisoners were handcuffed with all the prisoners on each side of the aisle joined together by a chain running through the handcuffs. Id. When the bus filled with dense smoke, the prisoners tried to exit without success. Id. One prisoner died from the ordeal and others suffered serious to permanent lung injury. Id. 87 Id. (citing Archie v. City of Racine, 847 F.2d 1211, 1218-19 (7th Cir. 1988)).
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(in this circuit) is merely a synonym for intentional or criminally reckless conduct,” it follows that deliberate indifference is the proper standard of conduct in the case of a pretrial detainee.88 Additionally, the Salazar court explained that, according to Wolfish, the proper inquiry when determining whether a state actor violated a pretrial detainee’s due process rights is whether the act at issue amounted to punishment of the detainee.89 The Salazar court then cited to its prior holding in Duckworth to explain that “punishment, in its normal meaning, implies intent; it is ‘a deliberate act intended to chastise or deter.’”90 The Salazar court explained its reasoning; “[f]or a jail guard deliberately to beat a pretrial detainee would be ‘punishment’; for the guard negligently to step on the detainee’s toe and break it would not be punishment ‘in anything remotely like the accepted meaning of the word.’”91 From there, the court reasoned that an act done with any state of mind less than intent is not punishment,92 and therefore “criminal recklessness is a proxy for intent.”93 Accordingly, “[s]ince the due process clause prohibits punishing a pretrial detainee . . . and since only intentional or criminally reckless conduct can amount to punishment, only . . . deliberate indifference to the detainee’s serious medical need—violates due process.”94 The Salazar court then carefully explained that adopting the deliberate indifference standard to govern § 1983 claims of pretrial detainees would not imply that the Eighth Amendment governs the claims.95 The court reasoned that even though the Eighth Amendment prohibits cruel and unusual punishment and the Fourteenth Amendment does not allow jailers to punish pretrial detainees at all,
88 Id. 89 Salazar, 940 F.2d at 239. 90 Duckworth, 780 F.2d at 652. 91 Salazar, 940 F.2d at 239. 92 Id. 93 Id. (citing Archie v. City of Racine, 847 F.2d 1211, 1220 (7th Cir. 1988)). 94 Salazar, 940 F.2d at 239. 95 Id.
105 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 both amendments prohibit punishment to a certain extent. To determine if an act violates a pretrial detainee’s rights, the proper question is, ‘does the act amount to punishment of the detainee?’ The Salazar court looks to its reasoning in Duckworth where it held that to be punishment an act must be intentional or criminally reckless.96 The court then reasoned that “punishment is punishment, and there is no reason why the term should mean two different things in the Eighth and Fourteenth Amendment contexts and concluded that Duckworth’s definition of punishment is just as relevant in the Fourteenth Amendment context as it is in the Eighth Amendment context.97 In 1996, the Seventh Circuit applied the deliberate indifference standard to pretrial detainees in Estate of Cole v. Fromm. In that case, the Seventh Circuit analyzed a § 1983 claim against prison officials in which officials allegedly knew that the plaintiff was a suicide risk and failed to provide him with adequate protection.98 In Cole, the Seventh Circuit acknowledged that the due process rights of a pretrial detainee were at least as great as the Eighth Amendment protection available to a convicted prisoner.99 The court noted that the Supreme Court had not resolved the issue of whether the deliberate indifference standard should apply to pretrial detainees and applied the Eighth Amendment deliberate indifference standard.100 In 1999, the Seventh Circuit explained in Higgins v. Correctional Medical Services of Illinois, Inc., that to properly state a claim for an Eighth Amendment violation, the plaintiff must show that the defendants were deliberately indifferent.101 Next, the Seventh Circuit explained that the rights of a pre-trial detainee are at least as great as the protection available to a convicted prisoner, and analyzed the
96 Id. 97 Id. 98 Estate of Cole v. Fromm, 94 F.3d 254, 259 (7th Cir. 1996). 99 Id. at 259 n.1. 100 Id. 101 Higgins v. Correctional Med. Services of Illinois, Inc., 178 F.3d 508, 511 (7th Cir. 1999).
106 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 complainant’s claim under the Eighth Amendment’s deliberate indifference standard.102 Currently, the Seventh Circuit, like most other circuits, considers the standard applied to convicted prisoners under the Eighth Amendment and pre-trial detainees under the Due Process Clause of the Fourteenth Amendment “to be analogous.”103 In 2002, in Washington v. LaPorte County Sheriff’s Department, the Seventh Circuit analyzed a pretrial detainee’s § 1983 claim under the deliberate indifference standard.104 The Seventh Circuit established in a mere two sentences that pretrial detainees’ claims can be analyzed under the same “deliberate indifference” standard used to analyze the claims of convicted prisoners.105 The Washington court explained that it analyzes the claims under the deliberate indifference standard because the pretrial detainees’ arguments are based on Eighth Amendment precedent.106
2. The Seventh Circuit’s Application of the Deliberate Indifference Standard in Klebanowski v. Sheahan.
In 2008, in Klebanowski v. Sheahan, the Seventh Circuit analyzed a § 1983 claim alleging that officials showed deliberate indifference to the due process rights of Klebanowski, a pretrial detainee.107 Klebanowski explained that three gang member inmates, Little E, Count and Yo-Yo, approached him and demanded that he pay them twenty dollars each month in return for their protection.108 After he refused, they beat him and told him that they would beat him again if he refused to pay him and that they would kill him if he told the
102 Id. 103 Washington v. LaPorte County Sheriff’s Dep’t, 306 F.3d 515, 517 (7th Cir. 2002). 104 Id. 105 Id. 106 Id. (citing Estate of Cole, 94 F.3d at 259 n.1). 107 Klebanowski v. Sheahan, 540 F.3d 633, 634 (7th Cir. 2008). 108 Id. at 635.
107 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 guards anything about the incident.109 Klebanowski’s injuries were serious enough for a guard to inquire about his condition.110 Fearing for his safety, Klebanowski stated that he had slipped.111 The guard doubted his explanation but recorded his statement as given without asking further questions.112 Later, Klebanowski requested he be moved to a different section of the jail because “he feared for his life.”113 The officers stated that they knew what happened to him but that moving him would not help because “the conditions were the same wherever he could be moved.”114 Later, Klebanowski approached a different set of officers and asked to be moved because he feared for his life.115 Again, the officers denied his request.116 The next day, a correctional officer working Klebanowski’s unit announced that he was going to open the cells and allow the inmates free time before lockdown.117 The officer also announced that he would leave the deck and return in a few minutes.118 Klebanowski exited his cell and while he was watching television, Little E, Count and Yo-Yo approached him from behind and beat him.119 This time, Count pulled a shank120 that he had concealed in his pants and stabbed
109 Id. 110 Id. 111 Id. 112 Id. 113 Id. 114 Id. 115 Id. 116 Id. 117 Id. 118 Id. 119 Id. 120 A shank is a homemade knife. Id; Interview with Cook County Dep’t of Corrections Inmate, in Chicago, IL (Nov. 25, 2008). An inmate, a pretrial detainee, explained that thin wavy metal pieces woven together once created the grates of the vents at the Cook County Jail, Division 9. Id. Inmates pulled off these pieces of the vents, straightened them out and sharpen the ends across the floor or walls of their cells. Id. The pieces are cut so that they are small and concealable and bundled
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Klebanowski on the left side of his stomach.121 Klebanowski was stabbed two more times while being beaten.122 He escaped the beating and jumped over a railing from the top deck to the lower deck.123 As he jumped over the deck, Count stabbed him again in the back of the head.124 Once Klebanowski reached the bottom deck, he ran to an exit and pressed a panic button.125 There was no response for five minutes.126 The correctional officers finally appeared after Klebanowski waved through a window.127 “Klebanowski spent two days in the hospital and had to have his spleen removed as a result of the injuries he sustained during the attack.”128 After learning of this attack, the officers searched all of the cells on the tier and uncovered fourteen shanks.129 Klebanowski filed suit under § 1983 in the district court on September 8, 2004.130 Klebanowski claimed that the defendants
together to create a dangerously powerful weapon. Id. These type of vents have since been replaced. Id. 121 Klebanowski, 540 F.3d at 635. 122 Id. 123 Id. Klebanowski was housed in division 11, a 640,000 square-foot, medium security facility consisting of a central core surrounded by four housing PODS (units). Cook County Department of Corrections, Division 11, http://www.cookcountysheriff.org/doc/html/div_11.html (last visited Dec. 9, 2008). 124 Klebanowski, 540 F.3d at 635 125 Id. 126 Id. 127 Id. 128 Id. 129 Id. 130 Id. Klebanowski sued Cook County Sheriff Michael Sheahan, Department of Corrections Director Callie Baird, and Superintendent of Division 11, Henry Troka in their official capacities. Id. He sued William Scott, Jermaine Smith and Rafael Trevizo individually. Id. Initially, Klebanowski also listed Baird’s predecessor, Ernesto Velasco. Klebanowski voluntarily dismissed Velasco on February 9, 2005. Id. Initially, Klebanowski listed the three correctional officers as “Unknown Corrections Officers 1, 2 & 3.” Id. On May 9, 2005, Klebanowski filed an amended complaint adding as a defendant Clifford Smith. Id. In a second
109 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 violated his Fourteenth Amendment rights by implementing three de facto policies: (1) allowing his wing to be controlled by gang members and not separating gang members from non-gang members; (2) allowing gang member inmates to keep weapons in their cells; and (3) leaving inmate wings entirely unsupervised regularly for significant periods of time.131 The Seventh Circuit explained that because Klebanowski was a pre-trial inmate, his § 1983 claims would be analyzed under the Due Process Clause of the Fourteenth Amendment rather than the Eighth Amendment’s Cruel and Unusual Punishment Clause. Klebanowski had to establish that the deliberate indifference to which he was subjected was a result of custom or policy established by the officials.132 To establish deliberate indifference on the part of the defendants sued individually, Klebanowski needed to show that the officers acted with the equivalent of criminal recklessness.133 The court ultimately held that Klebanowski did not show deliberate indifference on the part of the officers.134 Under the Eighth Amendment’s deliberate indifferent standard, the court’s analysis was correct. However, the standard used should not have been the same because Klebanowski had not been convicted of a crime; he was awaiting trial.
III. IMPLICATIONS OF TREATING PRETRIAL DETAINEES AS CONVICTED PRISONERS
The Supreme Court has not declared the appropriate standard for evaluating pretrial detainees’ § 1983 claims.135 While not resolving the
amended complaint, filed on July 14, 2005, Klebanowski named William Scott, Jermaine Smith, and Rafael Trevizo to replace the three unknown officers. Id. 131 Id. 132 Id. at 637. 133 Id. 134 Id. at 640. 135 See Estate of Cole v. Fromm, 94 F.3d 254, 259 (7th Cir. 1996).
110 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 appropriate approach, the Supreme Court and the circuit courts consistently apply the deliberate indifference standard.136
A. Problems with the Circuit Courts’ Current Analysis
The most frustrating aspect of the courts’ application of the same standard between convicted prisoners and pretrial detainees is the circuit courts’ lack of explanation for employing the same standard.137 Some courts that do provide an explanation for using the Eighth Amendment’s deliberate indifferent standard employ it for convenience—the circuit has used that standard previously.138 Others
136 See e.g. City of Canton, Ohio v. Harris, 489 U.S. 378 (1989); Pietrafeso v. Lawrence County, 452 F.3d 978, 982 (8th Cir. 2006) (analyzing a claim alleging failure of Lawrence County to provide adequate medical care and holding that the Eighth Amendment deliberate-indifference applies to pretrial detainees as well as convicted prisoners.); Andujar v. Rodriguez, 486 F.3d 1199, 1203-04 (11th Cir. 2007) (analyzing a claim where an inmate was bitten by a dog and finding that the standard that governs deliberate indifference claims to pretrial detainees’ serious medical needs is the same as the standard covering convicted prisoners’ claims); Gray v. City of Detroit, 399 F.3d 612, 616 (6th Cir. 2005) (holding that a pretrial detainee’s right to medical care is the same as the right afforded convicted prisoners under the Eighth Amendment). 137 See Burrell v. Hampshire County, 307 F.3d 1, 7 (1st Cir. 2002) (holding that pretrial detainees are protected under the Fourteenth Amendment rather than the Eighth Amendment but offering no analysis as to why the court uses the Eighth Amendment deliberate indifference standard for a pretrial detainee’s § 1983 claim); Cottrell v. Caldwell, 85 F.3d 1480, 1490 (11th Cir. 1996) (explaining in a mere two sentences that (1) the Due Process Clause of the Fourteenth amendment governs claims involving the mistreatment of pretrial detainees instead of the Eighth Amendment, and (2) the applicable standard is the same, so “decisional law involving prison inmates applies equally to cases involving arrestees or pretrial detainees.”); Crow v. Montgomery, 403 F.3d 598, 601 (8th Cir. 2005) (explaining that as a pretrial detainee, the plaintiffs claims are analyzed under the Due Process Clause and applying the Eighth Amendment’s deliberate indifference standard because under the Fourteenth Amendment pretrial detainees are entitled to at least as great protection as that afforded convicted prisoners under the Eighth Amendment.). 138 See Owens v. Scott County Jail, 328 F.3d 1026, 1027 (8th Cir. 2003) (holding that “although this court has not yet established a clear standard for determining when pretrial detention is unconstitutionally punitive, we have applied
111 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 identify the difference between pretrial detainees and convicted prisoners but fail to use any standard besides the Eighth Amendment’s deliberate indifference standard for pretrial detainees.139 Other courts have asserted that the standard for providing basic human needs is the same for pretrial detainees and convicted prisoners and reason that the Eighth Amendment standard should apply.140 The Eighth Circuit has even analyzed a pretrial detainee’s claim first under the Fourteenth Amendment and then under the Eighth Amendment.141 Other courts exhibit somewhat of a reversal in reasoning. These courts’ holdings suggest that a pretrial detainee should be able to receive the same level of care that a convicted prisoner is already constitutionally required to receive or that a pretrial detainee can bring the Eighth Amendment ‘deliberate indifference’ standard.”); Whitnack v. Douglass County, 16 F.3d 954, 957 (8th Cir. 1994) (applying a standard “identical to the legal standard” applied to convicted prisoners because the standard for “pretrial detainees ‘is not clearly established,’” and deliberate indifference is appropriate in the absence of a clearly established standard); Vaughn v. Green County, Ark., 438 F.3d 845, 850 (8th Cir. 2006) (recognizing that pretrial detainees deserve protection that is at least as great as the protection given to convicted inmates and applying the Eighth Amendment deliberate indifference standard to pretrial detainees because it has repeatedly applied that standard.); Board v. Farnham, 394 F.3d 469, 478 (7th Cir. 2005) (finding it “convenient and entirely appropriate to apply the same standard to claims [from detainees] arising under the Fourteenth Amendment . . . and [claims from convicted prisoners arising under the] Eighth Amendment.”). 139 See Estate of Morgan v. Toombs County, 400 F.3d 1313, 1318 n.13, 1319 (11th Cir. 2005) (asserting that whether or not the plaintiff is treated as a pretrial or convicted prisoner, the standard for providing basic human needs to those incarcerated is the same and proceeding to apply the Eighth Amendment’s deliberate indifference standard); Vaughn v. Green County, Ark., 438 F.3d 845, 850 (8th Cir. 2006). 140 See Estate of Morgan, 400 F.3d at 1318 n.13, 1319l; Gibbs v. Gimmette, 254 F.3d 545, 548 (5th Cir. 2001) (finding that “there is no significant distinction between pretrial detainees and convicted inmates concerning the basic human needs such as medical care,” and thus the Eighth Amendment’s deliberate indifference standard applies). 141 Smith v. Copeland, 87 F.3d 265, 268 n.4 (8th Cir. 1996) (finding that under Bell’s Fourteenth Amendment standard, the detainee’s claims “do not rise to a level of constitutional significance” and then holding that the detainee’s claim fails under the Eighth Amendment’s deliberate indifference standard).
112 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 the same claim that a convicted prisoner is already constitutionally entitled to bring.142 For example, in Barrie v. Grand County, the Tenth Circuit held that pretrial detainees are owed the same duty of medical care as that afforded convicted prisoners and applied the deliberate indifference standard. Likewise, in Danley v. Allen, the Eleventh Circuit explained that“[p]retrial detainees, who are not protected by the Eighth Amendment, can bring the same claims under the Fourteenth Amendment.” This analysis indicates that a convicted prisoner is constitutionally guaranteed a specific level of care or is constitutionally guaranteed the right to bring a specific claim, and a pretrial detainee can acquire care up to that level or can acquire the right to bring that specific claim. In contrast, the Supreme Court declared in Wolfish that the rights of a pretrial detainee are “at least as great” as a convicted prisoner’s rights.143 Thus, a convicted prisoner is constitutionally guaranteed a specific level of care or is constitutionally guaranteed the right to bring a specific claim, and a pretrial detainee deserves a level of care no less than that level or will not have to bring a claim any less compensatory as that claim. Another example in reversal in reasoning is the court’s determination of what to do when a claim involves both pretrial detainees and convicted prisoners. In 1978, the D.C. Circuit explained in Owens-El v. Robinson that “[w]here pretrial detainees and convicted prisoners are commingled in their cell assignments, the constitutional common denominator must be the rights of the pretrial detainees.”144 In contrast, in 2005, in Estate of Morgan, the Eleventh Circuit explained that whether or not the plaintiff is treated as a pretrial detainee or convicted prisoner, the standard for providing basic human
142 See Barrie v. Grand County, Utah, 119 F.3d 862, 868-869 (10th Cir. 1997) (holding that pretrial detainees are owed the same duty of medical care as that afforded convicted prisoners and applying the deliberate indifference standard); Danley v. Allen, 540 F.3d 1298, 1306 (11th Cir. 2008) (explaining that “[p]retrial detainees, who are not protected by the Eighth Amendment, can bring the same claims under the Fourteenth Amendment.”). 143 Bell v. Wolfish, 441 U.S. 520, 528 (1979). 144 Owens-El v. Robinson, 442 F. Supp. 1368, 1374 (D.C. Cir. 1978).
113 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 needs to those incarcerated is the same and proceeded to apply the Eighth Amendment’s deliberate indifference standard.145 This type of analysis indicates that courts have forgotten that pretrial detainees have greater rights than convicted prisoners. While the convicted prisoner has the right to be free from cruel and unusual punishment; the pretrial detainee has the right to be free from punishment altogether.146 Therefore, the pretrial detainee should be owed a higher standard of care than the convicted prisoner.
B. The Need for a Better Analysis
In this crucial time before the Supreme Court settles on a specific standard to apply, that pretrial detainees are differently situated than convicted prisoners cannot be forgotten. Justice Marshall points out in his dissent of Wolfish that “conspicuously lacking from [the majority’s] analysis is any meaningful consideration . . . that all of these detainees are presumptively innocent and many are confined solely because they cannot afford bail.”147 Marshall expresses disapproval of the Court’s lack of attention to the impact of pretrial detention on the individual detainee.148 That an individual cannot afford a bail bond, “is an insufficient reason for subjecting him to indignities that would be appropriate punishment for convicted felons.”149 The Wolfish majority took a narrow view of the presumption of innocence and asserted that it has no bearing on the rights of a pretrial detainee outside of the courtroom.150 Yet, it cannot be denied that a
145 Estate of Morgan v. Toombs County, 400 F.3d 1313, 1318 n.13 (11th Cir. 2005). 146 U.S. CONST. amend. VIII; Ingraham v. Wright, 430 U.S. 651, 671 n.40 (1977). 147 Bell v. Wolfish, 441 U.S. 520, 563 (1979) (Marshall, J., dissenting). 148 See id. at 563−587. 149 Id. 150 Id. at 533 (1979) (holding that the presumption of innocence “has no application to a determination of the rights of a pretrial detainee during confinement before his trial has even begun.”).
114 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 pretrial detainee is innocent until proven guilty beyond a reasonable doubt.151 It has been asserted that the legal status of a pretrial detainee should influence her conditions in jail.152 Additionally that, “[i]ncarceration of detainees and prisoners under the same conditions treats detainees as criminals.”153 Likewise, analyzing claims of detainees and prisoners under the same standard treats detainees as criminals or convicted prisoners. Convicted prisoners are incarcerated for punishment. Treating those convicted prisoners’ claims the same as pretrial detainees’ claims amounts to punishment of the detainee in violation of the due process clause.154
CONCLUSION
The United States currently houses the largest inmate population in the world with over two and a half million adults in prison and jail with over one in every one hundred adults in prisons and jails.155 On June 29, 2007, there were 780,581 inmates in local jails.156 Sixty-two
151 Coffin v. United States, 156 U.S. 432, 453 (1895) (holding that “every man is presumed to be innocent until his guilt is proved beyond a reasonable doubt”). 152 Rimat Kitai-Sangero, Conditions of Confinement—The Duty to Grant the Greatest Possible Liberty for Pretrial Detainees, 43 No. 2 CRIM. L. BULL. 4. 153 Id. 154 Ingraham v. Wright, 430 U.S. 651, 671 n.40 (1977) (holding that due process requires that a pretrial detainee not be punished at all). 155 U.S. DEPT. OF JUSTICE, BUREAU OF JUSTICE STATISTICS (Mid-year 2005), http://www.ojp.usdoj.gov/bjs/abstract/pjim05.htm; JENNIFER WARREN, THE PEW CENTER ON THE STATES, ONE IN 100: BEHIND BARS IN AMERICA 2008, http://www.pewcenteronthestates.org/uploadedFiles/8015PCTS_Prison08_FINAL_2 -1-1_FORWEB.pdf. Over two and a half million adults are in prison and jail. Id. The number of American adults is about 230 million. Id. One in thirty-six Hispanic adults is behind bars, one in fifteen black adults and one in nine black men between the ages of twenty and thirty-four is behind bars. Id; see also Adam Liptak, 1 in 100 U.S. Adults Behind Bars, New Study Says, N.Y. TIMES, Feb. 28, 2008, available at http://www.nytimes.com/2008/02/28/us/28cnd-prison.html. 156 DEPARTMENT OF JUSTICE, OFFICE OF JUSTICE PROGRAMS, SLOWER GROWTH IN THE NATION’S PRISON AND JAIL POPULATIONS (2008), http://www.ojp.usdoj.gov/bjs/pub/press/pim07jim07pr.htm; Jails are locally operated facilities that confine people who are pending trial or await movement to another
115 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 percent of those inmates had not been convicted on their current charge.157 Thus, almost half a million people are incarcerated without a conviction.158 Under the current state of the law, any § 1983 claim against prison officials from these pretrial detainees, will be analyzed under the Eighth Amendment deliberate indifference standard created for convicted prisoners. Accordingly, the law currently treats § 1983 claims from almost half a million innocent people as if they were convicted prisoners.
facility. U.S. DEPARTMENT OF JUSTICE, BUREAU OF JUSTICE STATISTICS, JAIL STATISTICS (Mid-year 2008), http://www.ojp.usdoj.gov/bjs/jails.htm. 157 Id. 158 Id. (Sixty-two percent of 780,581 is 483,960.22)
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WELCOME TO THE FAMILY: A NEW CLASS OF COGNIZABLE CLAIMS UNDER THE PREGNANCY DISCRIMINATION ACT
∗ TERESA A. MINNICH
Cite as: Teresa A. Minnich, Welcome to the Family: A New Class of Cognizable Claims Under the Pregnancy Discrimination Act, 4 SEVENTH CIRCUIT REV. 117 (2008), at http://www.kentlaw.edu/7cr/v4-1/minnich.pdf.
I. INTRODUCTION
Imagine that you are one of 25 million working women, or suppose that you are a husband and father who depends on your wife’s weekly paycheck to help provide basic support for your family.1 You, or your wife, are pregnant, and in addition to the menace of medical bills, your livelihood is further threatened because the new mother will have to take time off work in order to recover from her pregnancy. The compensation package at your, or your wife’s, place of work includes comprehensive non-occupational disability benefits, extending to disabilities such as venereal disease, athletic injuries, and even hair transplants, but the plan specifically excludes coverage for pregnancy and pregnancy-related medical conditions.2
∗ J.D. candidate, May 2009, Chicago-Kent College of Law, Illinois Institute of Technology; Bachelor of Arts, May 2004, College of Saint Benedict. 1 Committee on Labor and Human Resources, 96th Cong., LEGISLATIVE HISTORY OF THE PREGNANCY DISCRIMINATION ACT, 1978, at 3 (Comm. Print 1980) (noting that 25 million women working in 1978 to provide basic support for their families). 2 Legislative History of the PDA, at 2. G.E.’s program provided an employee who became disabled as a result of an eligible non-occupational injury or illness to receive 60% of his or her salary for a maximum of 26 weeks. Id. at 1.
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In 1976, the female employees of General Electric (“G.E.”) faced precisely this situation.3 Forty-three of the then-current and former female G.E. employees banded together to challenge G.E.’s benefits program.4 Alleging that G. E.’s exclusion of pregnancy from an otherwise comprehensive list of covered non-occupational disabilities violated Title VII of the U.S. Code, these women argued their case all the way to the Supreme Court—and lost.5 Utilizing the definition of discrimination developed in its Fourteenth Amendment jurisprudence,6 the Supreme Court of the United States determined that G.E.’s failure to provide disability benefits for pregnancy related work absences did not discriminate on the basis of sex.7 Congress reacted to the Supreme Court’s decision in General Electric Co. v. Gilbert by amending Title VII, explicitly providing, “the terms “because of sex” or “on the basis of sex”
3 Gen. Elec. Co. v. Gilbert, 429 U.S. 125, 129-130 (1976), overruled by Pregnancy Discrimination Act of 1978, 42 U.S.C. § 2000e(k) (2005). 4 Legislative History of the PDA at 4. 5 Gen. Elec., 429 U.S. at 138. The judge of the District Court of the Eastern District of Virginia and of the Fourth Circuit Court of Appeals ruled in favor of the female employees, holding that G.E.’s exclusion of pregnancy from its disability benefits plan constituted sex discrimination in violation of Title VII. Gilbert v. Gen. Elec. Co, 375 F. Supp. 367, 386 (E.D. Va. 1974), overruled by Gen. Elec. Co. v. Gilbert, 429 U.S. 125 (1976), overruled by Pregnancy Discrimination Act of 1978, 42 U.S.C. § 2000e(k) (2005); Gilbert v. Gen. Elec. Co., 519 F.2d 661, 668 (4th Cir. 1975), overruled by Gen. Elec. Co. v. Gilbert, 429 U.S. 125 (1976), overruled by Pregnancy Discrimination Act of 1978, 42 U.S.C. § 2000e(k) (2005). The Supreme Court’s interpretation of Title VII’s sex discrimination provisions overruled the holdings of 24 lower Federal courts. Legislative History of the PDA at 7. In addition, the Supreme Court refused to accord the force of law to EEOC Guidelines stating, “Disabilities caused or contributed to by pregnancy, miscarriage, abortion, childbirth, and recovery therefrom are, for all job-related purposes, temporary disabilities and should be treated as such under any health or temporary disability insurance or sick leave plan available in connection with employment. (Benefits) shall be applied to disability due to pregnancy or childbirth on the same terms and conditions as they are applied to other temporary disabilities.” Gen. Elec. 429 U.S. at 140-41 (quoting 29 C.F.R. § 1604.10(b) (1975). 6 Gen. Elec., 429 U.S. at 133. 7 Id. at 145-46.
118 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 include . . . because of or on the basis of pregnancy, childbirth, or related medical conditions.”8 Predictably, medical advances and technological innovation have forced courts to apply Title VII in a host of circumstances unconsidered by the express language of the Pregnancy Discrimination Act and its legislative history. Causes of Action examined as potentially cognizable include claims related to maternal leave to accommodate breastfeeding,9 insurance coverage of contraceptives,10 and adverse employment action due to an employee’s decision to have an abortion.11 Recently, the Seventh Circuit became the first Federal Circuit Court of Appeals to recognize a cognizable Title VII claim where a woman alleged an adverse employment action taken in response to her pursuit of in vitro fertilization, a type of infertility treatment.12 In so doing, the Seventh Circuit created a possible conflict with the Eighth and Second Circuits, which have both refused to recognize a cognizable Title VII claim where an employer excludes infertility treatments from insurance benefits plans.13 Furthermore, the Seventh Circuit’s reasoning creates a murky distinction between child bearing capacity and fertility—although discrimination based on child bearing capacity violates Title VII as amended by the Pregnancy Discrimination Act, discrimination based on fertility does not.14
8 Pregnancy Discrimination Act, 42 U.S.C. § 2000e(k) (2005). 9 See e.g. Barrash v. Bowen, 846 F.2d 927 (4th Cir. 1988); McNill v. N.Y.C. Dept. of Corrections, 950 F. Supp. 564 (S.D.N.Y. 1996); Martinez v. N.B.C., Inc., 49 F.Supp.2d 305 (S.D.N.Y. 1999); Wallace v. Pyro Min. Co., 789 F.Supp. 867 (W.D. Ky. 1990). 10 See e.g. In re Union Pac. R.R. Emp. Prac. Lit., 479 F. 3d 936 (8th Cir. 2007); Erickson v. Bartell Drug Co., 141 F.Supp.2d 1266 (W.D. Wash., 2001); Stocking v. AT&T Corp., 436 F.Supp.2d 1014 (W.D. Mo., 2006), reconsidered and vacated, 2007 WL 3071825 (W.D.Mo. 2007). 11 See e,g, Doe v. C.A.R.S. Protection Plus, Inc., 527 F.3d 358 (3d Cir. 2008); Turic v. Holland Hospitality, Inc., 85 F.3d 1211 (6th Cir. 1996). 12 Hall v. Nalco, 534 F.3d 644, 649 (7th Cir. 2008). 13 Saks v. Franklin Covey, 316 F.3d 337 (2d Cir. 2003); Krauel v. Iowa, 95 F.3d 674 (8th Cir. 1996) 14 Hall, 534 F.3d at 647-648.
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Despite the possible conflict and the obscure distinction, the Seventh Circuit correctly determined that adverse employment action based on an employee’s pursuit of infertility treatments is gender discrimination under the Pregnancy Discrimination Act. Furthermore, the Seventh Circuit correctly recognized its decision as distinguishable from those of the Second and Eighth Circuits.
II. THE PREGNANCY DISCRIMINATION ACT: GESTATION OF CIVIL RIGHTS PROTECTION
A. Title VII and the PDA
The history of the Pregnancy Discrimination Act15 begins fourteen years before its birth, with the enactment of Title VII of the Civil Rights Act of 1964. The relevant portion of Title VII states:
It shall be an unlawful employment practice for an employer—
(1) to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin.16
A sex discrimination claim may arise under Title VII when an employer perpetrates an adverse employment action due to an employee’s gender. In other words, an employer violates Title VII if it makes hiring, firing, or promotional decisions based on an employee’s gender.17 However, Title VII also prohibits gender discrimination in
15 Pregnancy Discrimination Act of 1978, 42 U.S.C. § 2000e(k) (2005). 16 42 U.S.C. § 2000e-2(a)(1) (2005). 17 Id. See e.g. Anderson v. City of Bessemer City, N.C., 470 U.S. 564, 580 (1985)(affirming District Court’s finding of gender discrimination where petitioner was denied position in favor of male applicant with qualifications inferior to petitioner’s and where selection committee demonstrated gender bias); Sparks v. Pilot Freight Carriers, Inc., 830 F.2d 1154, 1562-1566 (11th Cir. 1987)(denying
120 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 the terms and conditions of employment, including compensation, benefits, job assignments, and transfers.18 In addition, a Title VII claim may proceed under either a disparate treatment or disparate impact theory.19 Overt or intentional conduct that treats an employee in a manner which would be different but for the employee’s gender represents disparate treatment discrimination.20 In contrast, a facially neutral employment practice which is applied even-handedly to all employees but which, nonetheless, disproportionately impacts one gender violates Title VII under the disparate impact theory.21 The legislative history of Title VII, so expansive with regard to the matter of race and color, is nearly mute with respect to the meaning of the term sex and the extent of protection thereby provided.22 Virginia Congressman Howard Smith, a staunch opponent of civil rights legislation, proposed amending Title VII to include the term “sex” late in the Congressional deliberations, just two days
summary judgment on gender discrimination claim where employee was fired after refusing manager’s sexual advances and where male employee retained position). 18 42 U.S.C. § 2000e-2(a)(1) . See e.g. Ariz. Governing Committee for Tax Deferred Annuity and Deferred Compensation Plans v. Norris, 462 U.S. 1073, 1074 (1983)(holding that a retirement benefits plan which paid lower monthly benefits to woman than to men who made the same contributions constituted sex discrimination in violation of Title VII); City of Los Angeles, Dept. of Water and Power, 435 U.S. 702, 711 (1978)(holding that sex discrimination occurs where women are required to pay greater pension contributions than men due to females’ greater life expectancy) 19 Texas Dept. of Cmty. Affairs v. Burdine, 450 U.S. 248, 252-53 (1981)(defining the elements of the prima facie Title VII disparate treatment claim); Connecticut v. Teal, 457 U.S. 440, 448 (1982)(finding a violation of Title VII where employer administered examination had a disparate impact on black employees) 20 See Burdine, 450 U.S. at 253 (indicating that burden of proving intentional discrimination remains with plaintiff). 21 See Teal, 457 U.S. at 446 (noting that to establish a prima facie case of Title VII disparate impact, plaintiff must demonstrate “the facially neutral employment practice had a significantly discriminatory impact.”) 22 Erickson v. Bartell Drug Co., 141 F. Supp.2d 1266, 1269 (W.D. Wash. 2001).
121 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 before the final vote.23 Congress adopted the amendment after a mere two hours of floor debate.24 The Supreme Court attempted to interpret Congress’ prohibition of discrimination “because of…sex,” in General Electric v. Gilbert.25 According to the Supreme Court, the female G.E. employees failed to demonstrate a gender-based effect resulting from the exclusion of pregnancy related disabilities from coverage.26 Rather than representing an example of facial or pre-textual gender discrimination, the G.E. plan, in the Supreme Court’s view, was “nothing more than an insurance package, which covers some risks, but excludes others.”27 Since the male and female employees of G.E. received the exact same package covering the exact same categories of risk, the Supreme Court classified the benefits plan as facially
23 Commentators speculate that the term was added in an attempt to derail passage of the Civil Right Act by adding a controversial category to the list of protected classes. Id. But see Jo Freeman, How “Sex” Got into Title VII: Persistent Opportunism as a Maker of Public Policy, 9 LAW & INEQ. 163 (1990-1991) (arguing that the sudden addition of “sex” to the protections of Title VII is better understood as an instance of persistent opportunism forcing major public policy innovation). In support of her theory, Ms. Freeman notes several important factors which argue against the addition of “sex” as a ploy to strike down the Civil Rights Act: 1)The potential beneficiaries of the amendment—women— had experienced lobbyists on the Hill and were not uninterested in the bill; 2) most Southerners had conceded defeat and gone home by Wednesday; the vote occurred on a Saturday, which is not Members’ favorite day to be in Washington; 3) the number of Members voting on the amendment—301—was larger than any other counted vote that day (the others ranged from 178 to 240); 4) other amendments which might “clutter up” the bill, including “sex” amendments to other titles, were voted down. Id. at 164-65. 24 Freeman, supra note 23, at 163. 25 Gen. Elec. Co. v. Gilbert, 429 U.S. 125, 133 (1976), overruled by Pregnancy Discrimination Act of 1978, 42 U.S.C. § 2000e(k) (2005). 26 Id. at 137. 27 Id. at 138.
122 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 neutral.28 The Supreme Court also failed to detect any discriminatory effect. In the court’s reasoning, G.E.’s failure to provide pregnancy- related benefits did not change the parity of the benefits offered to men and women.29 Pregnancy-related illness and disabilities simply exemplified an “additional risk, unique to women,” that exceeded the benefits offered by the plan.30 However brief its original consideration of the term, following the Supreme Court’s decision in General Electric, Congress amended Title VII to include the following definition of sex discrimination: The terms ‘because of sex’ or ‘on the basis of sex’ include, but are not limited to, because of or on the basis of pregnancy, childbirth, or related medical conditions; and women affected by pregnancy, childbirth, or related medical conditions shall be treated the same for all employment related purposes, including receipt of benefits under fringe benefit programs, as other persons not so affected by similar in their ability or inability to work, and nothing in section 2000e-2(h) of this title shall be interpreted to permit otherwise.31 Now known as the Pregnancy Discrimination Act (“PDA”), this amendment to Title VII did not create any new rights or remedies.32 Rather, the PDA is a rejection of the Supreme Court’s holding and reasoning in General Electric.33 Through the PDA, Congress expressly provided that discrimination on the basis of pregnancy is per se sex discrimination and a violation of Title VII.34
28 Id. 29 Id, at 139. 30 Id. 31 Pregnancy Discrimination Act, 42 U.S.C. § 2000e(k) (2005). 32 Hall v. Nalco, 534 F.3d 644, 647 (7th Cir. 2008)(citing Newport News Shipping & Dry Dock Co. v. EEOC, 462 U.S.. 669, 678-679 (1983)). 33 Newport News, 462 U.S. at 670. 34 See Committee on Labor and Human Resources, 96th Cong., Legislative History of the Pregnancy Discrimination Act of 1978, at 126 (Comm. Print 1980) (stating that “since only the female sex can bear children, any attempt to single out
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B. Supreme Court Interpretation of the PDA
Since the amendment of Title VII by the PDA, the Supreme Court has had several occasions to consider the breadth and application of the PDA. Through Newport News v. EEOC and International Union v. Johnson Controls, the Supreme Court began to create an analytical and precedential framework to guide the interpretation and application of the Pregnancy Discrimination Act. In Newport News v. EEOC, the Supreme Court recognized the PDA as a rejection of the Court’s reasoning and holding in General Electric.35 Newport News, like General Electric, considered employees’ allegations of gender discrimination in the provision of employment benefits.36 In Newport News, the Supreme Court determined that the health insurance plan at issue violated Title VII by providing more comprehensive health care benefits to female employees than to male employees.37 Following the enactment of the Pregnancy Discrimination Act, Newport News Shipping had revised its health care plan to cover pregnancy, childbirth, and related medical conditions of its female employees.38 The company did not, however, extend pregnancy benefits to the female spouses of its male employees.39 The Supreme Court first noted that Title VII protects male as well as female employees from gender discrimination.40 Next, the and discriminate against the condition of pregnancy is an inherent attempt to single out and discriminate against women.”). 35 Newport News, 462 U.S. at 670. 36 Id. at 671. 37 Id. at 676. 38 Id. at 671-72. 39 Id. 40 Id. at 682. The Supreme Court found no merit in the Petitioner, Newport News’s, argument that Congress intended to limit the Pregnancy Discrimination Act’s application to pregnant employees and that Newport News had no statutory obligation to provide pregnancy benefits to the wives of its employees. The Supreme Court reasoned that Congress’s focus on female workers did not “create a ‘negative
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Supreme Court reasoned that Newport News had gifted its female employees with more favorable terms of employment than its male employees.41 Like the male employees in General Electric, the dependents of Newport’s female employees enjoyed protection from all categories of risk; in contrast, the female dependents of male employees lacked protection for pregnancy related illness. 42 Because Newport News had provided pregnancy disability insurance coverage for its female employees, but not for the spouses of its male employees, the company discriminated on the basis of pregnancy and violated Title VII.43 Unlike the benefits-received reasoning employed by the Supreme Court in General Electric, the reasoning embraced in Newport News is risk oriented.44 In Newport News, the Supreme Court recognized the General Electric dissenters’ interpretation of Title VII as the approved Congressional interpretation.45 Justice Brennan’s General Electric dissent argued that a policy which specifically excludes pregnancy related illness from a benefits package is facially inference’ limiting the scope of the act to the specific problem that motivated its enactment” and determined that the question of differential treatment of dependents “should be resolved ‘on the basis of existing title VII principles.’” Id. at 680 (quoting Committee on Labor and Human Resources, 96th Cong., Legislative History of the Pregnancy Discrimination Act of 1978, at 42-43 (Comm. Print 1980). 41 Id. at 683. 42 Id. at 684. 43 Id. The Supreme Court assumed only heterosexual couples exist, and noted, “since the sex of the spouse is always the opposite of the sex of the employee, it follows inexorably that discrimination against female spouses in the provision of fringe benefits is also discrimination against male employees.” Id. For a discussion of access to reproductive technology and same-sex couples, see Judith F. Daar, Accessing Reproductive Technologies: Invisible Barriers, Indelible Harms, 23 BERKELEY J. OF GENDER, L. & JUST. 18 (2008). 44 Compare Gen. Elec. Co. v. Gilbert, 429 U.S. at 138-139, with Newport News 462 U.S. at 678. 45 Newport News, 462 U.S. at 678. The Newport court pointed to sections of the Legislative History of the PDA which expressed Congress’s favor for the reasoning and perception of the dissent. For example, the House Report stated, “It is the Committee’s view that the dissenting Justices correctly interpreted the Act.” Id. The Senate Report also quoted from the dissenting justices’ opinions. Id.
125 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 discriminatory.46 Contrary to the majority’s perception of gender neutral classifications based on pregnant and non-pregnant, Justice Brennan asserted that any classification based on pregnancy must be “at minimum, strongly ‘sex related.’”47 But for pregnancy, argued Justice Brennan, the plan “offers protection for all risks, even those that are ‘unique to’ men or heavily male dominated.”48 By excluding pregnancy, a uniquely feminine condition, from coverage, the General Electric disability program left a greater burden of risk upon the female employees than it did upon the male.49 Whereas men were protected from all categories of risk to which they could be subjected, women received only partial protection.50 Adopting Justice Brennan’s analytical approach, the Newport court analyzed the comprehensiveness of coverage offered to males and females by evaluating the risks to which each gender remained exposed.51 Because the Newport plan refused coverage of pregnancy related illness to female dependents of male employees, the Court concluded that the plan “provide[d] more complete hospitalization coverage for the spouses of female employees than it did for the spouses of male employees,”52 and therefore “unlawfully [gave] married male employees a benefit package for their dependents that is less inclusive than the dependency coverage provided to married female employees.”53 The Supreme Court’s decision in International Union is equally important to the Seventh Circuit’s analysis in Hall v. Nalco. Unlike Newport and General Electric, International Union concerned adverse employment actions perpetrated due to gender discrimination
46 Gen. Elec., 429 U.S. at 148 (Brennan, J., dissenting). 47 Id. at 149. 48 Id. at 160. 49 Newport News, 462 U.S. at 677-678. 50 Id. at 678 (quoting Gen. Elec., 429 U.S. at 161-62 n.5 (Brennan, J., dissenting)). 51 Id. at 683-684. 52 Id. 53 Id. at 684.
126 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 rather than unequal terms of employment.54 In International Union, male and female employees of the battery manufacturer, Johnson Controls, challenged the company’s fetal protection policy as a violation of Title VII.55 The fetal protection policy prohibited fertile women from performing jobs involving lead exposure with the stated goal of protecting the females’ unborn children.56 Despite credible scientific evidence demonstrating negative fetal effects due to the father’s exposure to lead, Johnson Controls allowed fertile men to risk their reproductive health.57 The Supreme Court concluded, “Johnson Controls’ policy is not neutral because it does not apply to the reproductive capacity of the company’s male employees in the same way as it applies to that of the females.”58 Because it treated the reproductive capacities of each gender differently, the fetal protection policy could not be a classification based on “fertility alone.”59 Rather, the policy discriminated based on fertility and on gender and childbearing capacity.60 By targeting female reproductive capacity in particular, the policy discriminated on the basis of “potential for pregnancy,” and could not be considered facially neutral.61 In Newport and International Union, the Supreme Court began the creation of an analytical and precedential framework to guide lower courts in their interpretation of the Pregnancy Discrimination Act. By repudiating the General Electric majority’s reasoning and by embracing Justice Brennan’s analytical approach, the Supreme Court has directed lower courts to focus on the risks to which gender classification remain vulnerable when analyzing the neutrality of employment benefits. In contrast, International Union creates
54 Int’l Union v. Johnson Controls, 499 U.S. 187, 192 (1991). 55 Id. 56 Id. at 191-192. 57 Id. at 197-198. 58Id. at 199. 59 Id. at 198. 60 Id. 61 Id. at 199.
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Supreme Court precedent suggesting that employers may differentiate among employees according to fertility, so long as those differentiations occur in a gender neutral manner.
III. THE BOUNCING BUNDLE OF JOY: A NEW CLASS OF CLAIMS IN THE PDA FAMILY
In its recent decision, Hall v. Nalco, the Seventh Circuit became the first Circuit Court of Appeals to recognize a cognizable claim of Title VII sex discrimination where an employer allegedly perpetrated an adverse employment action in response to an employee’s pursuit of infertility treatments. More specifically, Ms. Hall, the plaintiff in Hall, sought leave from her job in order to undergo in vitro fertilization, a surgical impregnation procedure. According to Ms. Hall’s allegations, her employer terminated her as a result of her request for leave.
A. The Problem of Infertility
Infertility is a common problem that affects approximately 10% of all couples in the United States.62 Within that 10% of infertile couples, 40% of all cases are attributable to male infertility factors, and a corresponding 40% of cases are attributable to female infertility factors.63 Doctors attribute the remaining 20% of cases to a combination of male and female infertility issues.64 According to the medical community, infertility is “a disease or condition of the reproductive system often diagnosed after a couple has had one year of unprotected, well-timed intercourse, or if the woman has suffered from multiple miscarriages.”65 For couples who wish to conceive despite
62 Bradley J. Voorhis, In Vitro Fertilization, 356 NEW ENG. J. MED. 379, 379 (2007). 63 Bentley, supra note 10, at 394-395. 64 Id. 65 Elizabeth A. Pendo, The Politics of Infertility: Recognizing Coverage Exclusions as Discrimination, 11 CONN. INS. L.J. 293, 297 (2004-2005).
128 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 reduced fertility of either the male or female form, medical assistance exists in the form of hormone treatments, prescription drugs, and corrective surgeries such as the repair or removal of blockages from fallopian tubes.66 Eighty-five to ninety percent of infertility cases are able to conceive using the treatments already described.67 The remaining 10– 15 % of cases, however, may turn to more drastic measures such as surgical impregnation procedures.68 Surgical impregnation procedures come in a variety of forms, including in vitro fertilization, Gamete Intrafallopian Transfer (GIFT), and Zygote Intrafallopian Transfer (ZIFT).69 The procedures are defined by the manner in which fertilization is attempted and the location in which implantation of the fertilized egg occurs.70 With in vitro fertilization, for instance, the female’s eggs are surgically extracted and then fertilized by the male’s sperm in a laboratory.71 The embryos resulting from fertilization are then placed in the female’s womb.72 Many gender specific infertility problems have prescribed treatments that must be performed on the particular individual suffering from the problem.73 Surgical impregnation procedures, although performed only on women, can be used to treat both male and female fertility.74
66 Id. at 299-300. 67 Id. at 300. 68 Id. 69 Bentley, supra note 10, at 396. 70 Id. 71 MARK H. BEERS, MERCK MANUAL OF MEDICAL INFORMATION 1418-1419 (2d Home ed., Pocket Books 2003). 72 Id. 73 See, e.g., Stuart S. Howards, Treatment of Male Infertility, 332 NEW ENG. J. MED. 312, 313-316 (1998); Howard S. Jones & James P. Toner, The Infertile Couple, 329 NEW ENG. J. MED. 1710, 1711-1712 (1993). 74 See Howards, supra note 73, at 313-316.
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B. Hall v. Nalco
Ms. Hall began working for Nalco in 1997, becoming a sales secretary in 2000.75 In March 2003, Ms. Hall requested a leave of absence to undergo in vitro fertilization.76 This leave was approved by her direct supervisor and lasted from March 24 through April 21.77 Unfortunately, Ms. Hall’s first attempt to become pregnant through reproductive technology failed.78 Upon returning to work, Ms. Hall informed her supervisor that she would be requesting additional leave in order to undergo the in vitro fertilization procedure again.79 Beginning in January of 2003, several months prior to Ms. Hall’s initial request for leave, Nalco began preparations for a consolidation of its sales offices.80 Sometime between that January and July of 2003, Nalco determined that the consolidated sales offices would require only one secretary.81 Since each office had its own secretary, one of them would have to be let go following completion of the consolidation.82 After Ms. Hall returned from her first leave and requested additional leave to again attempt in vitro fertilization, Ms. Hall was terminated.83 In response to her termination, Ms. Hall brought a gender discrimination claim under Title VII as amended by the Pregnancy Discrimination Act, alleging that Nalco terminated her because of her request for leave to undergo in vitro fertilization treatments.84 To demonstrate a causal link between her attempts to become pregnant and her termination, Ms. Hall offered several statements from her
75 Hall v. Nalco, 534 F.3d 644, 646. (7th Cir. 2008) 76 Id. 77 Id. 78 Id. 79 Id. 80 Id. 81 Id. 82 Id. 83 Id. 84 Id. at 645.
130 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 supervisor, which asserted that the termination was in Ms. Hall’s “best interest due to [her] health condition.”85 In addition, Ms. Hall pointed to notes regarding the content of a meeting between the supervisor and the employee relations manager which specifically mentioned her infertility treatments.86 Specifically, the notes read, “missed a lot of work due to health,” and, “absenteeism-infertility treatments.”87 Without reaching the merits of Ms. Hall’s claim, the District Court for the Northern District of Illinois granted summary judgment for the defendant, Nalco.88 Concluding that infertile women are not a protected class under the Pregnancy Discrimination Act,89 the District Court held that Ms. Hall could not demonstrate sex discrimination because infertility is a gender neutral condition.90 Ms. Hall appealed the District Court judgment, and the Seventh Circuit reversed, stating, “Because adverse employment actions taken on account of childbearing capacity affect only women, Hall has stated a cognizable sex-discrimination claim under the language of the PDA.”91
85 Id. at 646. 86 Id. 87 Id. 88 Id. 89 Id. at 645. 90 Id. In so holding, the District Court called two previous Northern District of Illinois cases into question. See Pacourek v. Inland Steel Co., 858 F. Supp. 1393 (N.D. Ill. 1994); Erickson v. Bd. of Governors of State Coll. and Univ. for Northeastern Ill. Univ., 911 F. Supp. 316 (N.D. Ill. 1995). Both of these cases involved female employees who utilized sick days or other leave in order to undergo infertility treatments. In each case, the female was terminated and brought suit under the PDA alleging that an adverse employment action had occurred. And in both cases, the District Court found their claims cognizable, arguing that the PDA extends protection to potential pregnancy. See Pacourek, 858 F.Supp. at 1401; Erickson, 911 F.Supp. at 319. The Court also argued that a female undergoing fertility treatments should be included in the class of women who are potentially pregnant. Pacourek, 858 F.Supp. at 1403; Erickson, 911 F.Supp. at 320. 91Hall, 534 F.3d at 645. Although Ms. Hall based her case on the argument that infertile women are a protected class under the PDA, the Seventh Circuit analyzed the case under the childbearing capacity/potential pregnancy legal theory. Id. at 649 n. 3.
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By so stating, the Seventh Circuit classified the pursuit of infertility treatments as a medical condition related to pregnancy within the meaning of the PDA and recognized an adverse employment action based on an employee’s pursuit of infertility treatments as a cognizable claim Title VII claim.92
IV. MAKING ROOM FOR THE NEW ARRIVAL: HALL V. NALCO AND CONTEMPORARY PDA JURISPRUDENCE
Although likely to face a warm reception from champions of a liberal interpretation of the Pregnancy Discrimination Act (“PDA”),93 the Seventh Circuit’s decision to recognize pursuit of infertility treatments as a medical condition related to pregnancy causes some strain in the context of contemporary PDA jurisprudence. First, the Seventh Circuit’s holding creates a possible conflict with the Second and Eighth Circuits, both of which have previously refused to recognize a cognizable claim arising from the exclusion of infertility treatments from insurance coverage.94 Second, in articulating and justifying its decision, the Seventh Circuit created a murky distinction between fertility related medical conditions, which do not give rise to a cognizable claim under the PDA, and childbearing related medical conditions, which can give rise to a cognizable claim under the PDA.95 Despite the seeming obscurity of this distinction, Supreme Court precedent, the legislative history of the PDA, and logic indicate that
92 Id. at 646. 93 See Pendo, supra note 65, at 343 (arguing that comprehensive insurance coverage of infertility treatments would lead to better, more humane, and more cost- effective treatments); Julie Manning Magid, Contraception and Contractions: A Divergent Decade Following Johnson Controls, 41 AM. BUS. L.J. 115, 142-144 (2003) (advocating a broad interpretation of the PDA). But see Katherine E. Abel, The Pregnancy Discrimination Act and Insurance Coverage for Infertility Treatment: An Inconceivable Union, 37 CONN. L. REV. 819, 849-850 (2005) (urging a more complete understanding of the moral and legal implications of infertility treatments before expanding PDA protection). 94 Saks v. Franklin Covey, 316 F.3d 337 (2d Cir. 2003); Krauel v. Iowa, 95 F.3d 674 (8th Cir. 1996). 95Hall, 534 F.3d at 647-648.
132 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 the Seventh Circuit correctly determined that adverse employment action based on an employee’s pursuit of infertility treatments is cognizable gender discrimination under the PDA. To the extent that the Seventh Circuit’s opinion is inconsistent with those of the Eighth and Second Circuits, the Seventh Circuit has chosen the more logical approach.
A. Establishing the New-Born Identity: The Distinction Between Fertility and Childbearing Capacity
Given the express language of the PDA96 and Supreme Court precedent suggesting that infertility is a gender neutral characteristic lacking protection under the PDA97, Ms. Hall’s claim does not immediately appear as the ideal candidate for coverage under the PDA. In the District Court, Hall alleged that she was “a member of a protected class, female with a pregnancy related condition, infertility.”98 The District Court promptly dismissed her claim on summary judgment, stating that infertile women are not a protected class under the PDA because infertility is a gender neutral condition.99 Although accepting the Supreme Court’s implication that infertility discrimination is not prohibited by the PDA, the Seventh Circuit nevertheless found the District Court’s emphasis on “infertility alone” was misplaced within the factual context of Ms. Hall’s claim.100 According to the Seventh Circuit’s reasoning, Ms. Hall’s claim did not allege infertility discrimination, but rather discrimination on the basis of childbearing capacity, a gender-specific trait qualifying as a medical
96 Pregnancy Discrimination Act, 42 U.S.C. § 2000e(k) (2005). 97 Int’l Union v. Johnson Controls, 499 U.S. 187, 198 (1991). 98 Hall, 534 F.3d at 646. 99 Id. 100 Id. at 648. Despite the Supreme Court precedent provided by International Union, commentators continue to argue that infertility should receive protection under Title VII as amended by the PDA. See Pendo, supra note 65, at 336-338 (arguing that infertility is a gender-specific trait because it is still seen as a “woman’s problem” and because infertility has a disproportionate psychological impact on females).
133 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 condition related to pregnancy under the PDA.101 The Seventh Circuit thereby reached two separate conclusions: 1) childbearing capacity is separate and distinct from fertility, and 2) childbearing capacity is a medical condition related to pregnancy and, therefore, a protected classification under Title VII as amended by the PDA. The distinction between childbearing capacity and fertility at first appears murky. Fertile, in medical terminology, means “fruitful; having the capacity to reproduce.”102 Logically, a female who is capable of reproducing, and who is therefore fertile, must be capable of bearing a child. Nevertheless, the Seventh Circuit properly recognized childbearing capacity as gender specific while continuing to maintain the gender neutrality of infertility. Although the Seventh Circuit referred to Newport News in support of its recognition of the PDA as a Congressional overruling of General Electric,103 the Seventh Circuit’s reasoning in support of the distinction between childbearing capacity and fertility relied almost exclusively on International Union.104 The Seventh Circuit reiterated the Supreme Court’s finding that a fetal protection policy which classifies on the basis of gender and childbearing capacity rather than fertility alone violates Title VII.105 According to the Seventh Circuit, “As Johnson Controls illustrates, even where (in)fertility is at issue, the employer conduct complained of must actually be gender neutral to pass muster.”106 An action undertaken by an employer based on an employee’s childbearing capacity, however, can never be gender neutral: the Seventh Circuit argued, “Employees terminated for taking time off to undergo IVF—just like those terminated for taking time off to give birth or receive other pregnancy-related case—will always be
101 Hall, 534 F.3d at 648-649. 102 th DORLAND’S ILLUSTRATED MEDICAL DICTIONARY 684 (Elsevier, 30 ed. 2003). 103 Hall, 534 F.3d at 647 (citing Newport News v. EEOC, 462 U.S. 669, 676- 678 (1983)). 104 Id. at 648-649. 105 Id. at 648. 106 Id.
134 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 women.”107 Therefore, the Seventh Circuit’s distinction between childbearing capacity and fertility is best understood as a reiteration of the Supreme Court’s suggestion that an employer may differentiate between employees on the basis of fertility, so long as the employer does so in a gender neutral manner. Differentiation based on employees’ childbearing capacity is differentiation based on fertility; however differentiation based on childbearing capacity is not a gender neutral differentiation based on fertility and it therefore violated Title VII as amended by the PDA. Having reached the logic behind the Seventh Circuit’s differentiation between childbearing capacity and fertility, one must still consider whether childbearing capacity is appropriately considered a medical condition related to pregnancy. The PDA states, “The terms ‘because of sex’ or ‘on the basis of sex’ include, but are not limited to, because of or on the basis of pregnancy, childbirth, or related medical conditions . . .”108 The PDA does not define related medical condition. Furthermore, the Supreme Court’s only guidance appears by implication in International Union, where the Supreme Court appeared to suggest that employment discrimination on the basis of fertility is permissible under Title VII and the PDA so long as the discrimination is truly gender neutral.109 Clearly, there is a causal chain between fertility treatments and pregnancy, but the Circuit Courts of Appeal rather unanimously require more than a simple causal chain to establish a medical condition related to pregnancy.110
107 Id. at 648-649. 108 Pregnancy Discrimination Act 42 U.S.C. § 2000e(k) 109 Int’l Union v. Johnson Controls, 499 U.S. 187, 198 (1991). The Second, Seventh, and Eighth Circuits all appear to accept this implication as sound and binding precedent. E.g., Saks v. Franklin Covey, 316 F.3d 337, 346 (2d Cir. 2003); Hall, 534 F.3d at 638; Krauel v. Iowa, 95 F.3d 674, 679 (8th Cir. 1996). 110 E.g. Fleming v. Ayers & Assoc.’s, 948 F.2d 993, 997 (6th Cir. 1991) (medical related conditions under the PDA do not encompass adverse employment actions based on the medical condition of the child simply because the condition is present at birth); Troupe v. May Dept. Stores Co., 20 F.3d 734 (7th Cir. 1994) (affirming grant of summary judgment to employer who terminated female employee who arrived late due to morning sickness); In re Union Pac. R.R. Employment Practices Litig., 479 F.3d 936, 941 (8th Cir. 2007) (rejecting argument
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The Eighth Circuit in particular has taken a conservative view of what constitutes a medical condition related to pregnancy and childbirth.111 In International Union, the Supreme Court found sex discrimination because the fetal protection policy was classified based on childbearing capacity and potential for pregnancy.112 Heedless of the inclusion of “potential for pregnancy” within the PDA, the Eighth Circuit refuses to extend PDA coverage to issues and conditions which predate pregnancy. 113 If the Eighth Circuit clings to this line of reasoning, it will likely refuse PDA protection for claims such as Ms. Hall’s. But if the Eighth Circuit realizes the error of its approach, or at least decides to temper that approach upon recalling the decision in International Union, it should reach the same conclusion which the Seventh Circuit reached in Hall. Even if the Eighth Circuit wished to perpetuate its refusal to class use of contraceptives as a medical condition related to pregnancy, the Eighth Circuit could still reach the Seventh Circuit’s holding that pursuit of surgical impregnation procedures is a medical condition related to pregnancy in the context of adverse employment actions. First, although the in vitro fertilization treatments received by Ms. Hall necessarily occur prior to conception, just like the contraceptives for which the plaintiffs sought insurance coverage in In that causal chain between contraceptives and pregnancy entitled petitioner to Title VII relief); McNill v. N. Y.C. Dept. of Correction, 950 F. Supp.564, 570-571 (S.D.N.Y. 1996) (limiting “related medical conditions” to incapacitating conditions in the mother for which medical care is usual and normal). 111 In re Union, 479 F.3d at 941. For a brief additional discussion of the Eighth Circuit’s decision in In re Union, see Harvard Law Review Association, Employment Law—Title VII—Eighth Circuit Holds That Benefits Plans Excluding All Contraceptives Do Not Discriminate Based on Sex—In Re Union Pacific Railroad Employment Practices Litigation, 479 F.3d 936 (9th Cir. 2007), Reh’g and th Reg’g En Banc Denied, No. 06-1706 (8 Cir. May 23, 2007), 121 HARV. L. REV. 1447 (2008). For a discussion regarding insurance coverage of contraceptives generally, see Pendo, supra note 65, at 293-343; Ernest F. Lidge III, An Employer’s Exclusion of Coverage for Contraceptive Drugs is Not Per Se Sex Discrimination, 76 TEMP. L. REV. 533 (2003). 112 Int’l Union, 499 U.S. at 198-199. 113 In re Union, 479 F.3d at 939.
136 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 re Union, the treatments are conceptually different from contraceptives. Second, in vitro fertilization and similar surgical impregnation procedures are less open to characterization as gender- neutral than is contraceptive use. In addition to the temporal disconnection between contraceptive use and pregnancy, the Eighth Circuit also identified a conceptual dissonance between the issues, arguing, “Contraception is not a medical treatment that occurs when or if a woman becomes pregnant; instead contraception prevents pregnancy from even occurring.”114 In contrast, surgical impregnation procedures are undertaken with the specific intent of instigating pregnancy rather than preventing it. A woman who undergoes in vitro fertilization has a clear intention of becoming pregnant. As a result, fertility treatments such as in vitro fertilization are much more closely related to the concept of potential pregnancy than are contraceptives. In In re Union, the Eighth Circuit also asserted that contraception, like infertility, is a gender-neutral term.115 Men and women do suffer equally from infertility,116 and both men and women may seek to avoid an unplanned pregnancy by utilizing contraceptives. However, only women can undergo surgical impregnation procedures. Therefore, as the Seventh Circuit noted, only women will ever request leave of absence from their employer for the purpose of undergoing infertility treatments of this type, and only women will be the subject of adverse employment actions taken in response to those requests.117 In any event, the Eighth Circuit’s stark refusal to consider pre- pregnancy conditions as potential medical conditions related to
114 Id. at 942. 115 Id. at 943. The dissent argues that contraception is far less gender-neutral than the Eighth Circuit would claim and asserts that the burden of excluding any contraceptive, including surgical forms performed only on men, falls on women because women remain the sole gender capable of becoming pregnant. Id. at 945 (Bye, J. dissenting). 116 James F. Donovan & Jay I. Sandlow, The Infertile Couple, 330 NEW ENG. J. MED. 1154, 1154 (1994) (stating that male infertility is a primary or secondary factor in fifty percent of infertile couples) 117 Hall v. Nalco, 534 F.3d 644, 648-649 (7th Cir. 2008).
137 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 pregnancy is inappropriate in light of both the Supreme Court precedent already cited and the legislative history of the PDA. The PDA was drafted and passed in response to the Supreme Court’s decision in General Electric, and for the stated purpose of countering the societal perspective of women as temporary members of the workforce who would cease working as soon as pregnancy and a family occurred.118 This perception affected not only pregnant women but every woman perceived by her employer as potentially pregnant.119 Employers hesitated to advance women to positions and salaries of importance due to the belief that the women would not be in the workplace for more than a few years.120 Recognizing this prevalent societal view, the enacting Congress understood that forbidding an employer to discriminate against pregnant women is a useless stopgap if the employer remains free to discriminate against women who the employer knows or suspects to be attempting to become pregnant.121 If, based on logic, legislative history, and Supreme Court precedent, it is essential to include potentially pregnant women within the protection of the PDA, it makes no sense to distinguish between potentially pregnant women based on whether they intend to become pregnant through natural means or with the assistance of reproductive technology. Given the legislative history and purpose surrounding the PDA and the Supreme Court’s recognition of PDA coverage of potential pregnancy, the Seventh Circuit created a valid distinction between childbearing capacity and fertility and correctly classified childbearing capacity as a medical condition related to pregnancy.
118 Committee on Labor and Human Resources, 96th Cong., Legislative History of the Pregnancy Discrimination Act of 1978, at 3 (Comm. Print 1980). 119 Id. at 62. 120 Id. at 3. 121 Id. at 62-63.
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B. Keeping Peace Between the Siblings: Distinguishing Hall from Saks and Krauel
Although the Seventh Circuit is the first Circuit Court of Appeals to recognize a cognizable claim where an adverse employment action arises from a woman’s pursuit of surgical impregnation procedures, two other Circuit Courts have considered a closely related issue: whether gender discrimination occurs where an employer excludes insurance coverage for surgical impregnation procedures.122 Neither the Eighth Circuit, which considered the question in Krauel v. Iowa, nor the Second Circuit, which faced the issue in Saks v. Franklin Covey, extended the protection of the PDA to women undergoing the procedures.123 As the Seventh Circuit points out, neither the Eighth nor the Second Circuits considered the precise question at issue in Hall.124 Furthermore, to the extent that the Seventh Circuit’s opinion is inconsistent with those of the Eighth and Second Circuits, the Seventh Circuit has chosen the more logical approach. In Krauel, the Eighth Circuit considered the PDA claim of a female respiratory therapist who had been denied coverage under her company plan for a surgical impregnation procedure.125 The insurance policy in question excluded not just treatment of female infertility problems but treatment of male infertility as well.126 The Eighth Circuit construed the terms of the PDA narrowly, determining that the general term “related medical condition” should be understood as referring to the specific terms of pregnancy and childbirth and should not be extended outside of those contexts.127 Based on this restrictive
122 Saks v. Franklin Covey, 316 F.3d 337, 345 (2d Cir. 2003); Krauel v. Iowa, 95 F.3d 674, 679 (8th Cir. 1996). 123 Saks, 316 F.3d at 345; Krauel, 95 F.3d at 679. 124 Hall v. Nalco, 534 F.3d 644, 646 (7th Cir. 2008). 125 Krauel, 95 F.3d at 675. Specifically, Ms. Krauel underwent GIFT, a surgical infertility treatment procedure in which the ova and sperm are mixed in a Petri dish. The mixture is then inserted in the fallopian tube to allow natural fertilization to occur. Id. at 676, 676 n.3. 126 Krauel v. Iowa, 95 F.3d 674, 676 (8th Cir. 1996). 127 Id. at 679.
139 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 interpretation of “related medical conditions,” the Eighth Circuit found fertility treatments to be too temporally and conceptually disconnected from pregnancy and childbirth to be a cognizable claim under the PDA; the Court argued, “[p]regnancy and childbirth, which occur after conception, are strikingly different from infertility, which prevents conception.”128 Similarly, in Saks, the Second Circuit addressed the gender discrimination claim of a female employee who had been denied insurance coverage for a surgical impregnation procedure.129 Unlike the policy at issue in Krauel, however, the policy which denied the Ms. Saks coverage did cover some fertility treatments. Ovulation kits, oral fertility drugs, medically-necessary penile prosthetic implants, and nearly all surgical infertility treatments other than surgical impregnation procedures received insurance coverage.130 The policy expressly excluded coverage for surgical impregnation procedures, including artificial insemination, in vitro fertilization (“IVF”), and embryo and fetal implantation.131 Ms. Saks was denied coverage for an IVF attempt and related prescription drug therapy.132 At the Second Circuit, Ms. Saks argued that the insurance plan violated the Pregnancy Discrimination Act by providing less comprehensive coverage for surgical treatments addressing female infertility than it provided for non-pregnancy related illness.133 Although recognizing
128 Id. 129 Saks v. Franklin Covey, 316 F.3d 337, 341 (2d Cir. 2003). 130 Id. Specifically, the plan covered surgical procedures including those to remedy variococeles (varicose veins in the testicles leading to low sperm count), blockages of the vas deferens (also a procedure performed on males), endometriosis, and tubal occlusions. Id. 131 Id. 132 Id. 133 Id. at 342. Saks also raised a Title VII argument, alleging that the plan violated Title VII by providing “incomplete coverage for surgical treatments for female infertility but. . .complete coverage for surgical procedures remedying male infertility.” Id.
140 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 that the PDA “clearly embraces more than pregnancy itself,”134 the Second Circuit rejected Saks’ argument, stating:
Including infertility within the PDA’s protection as a “related medical condition[]” would result in the anomaly of defining a class that simultaneously includes equal numbers of both sexes and yet is somehow vulnerable to sex discrimination…[W]e hold that infertility standing alone does not fall within the meaning of the phrase “related medical conditions” under the PDA.135
Like the Eighth Circuit, the Second Circuit differentiated its case from International Union. According to the Second Circuit’s reasoning, unlike the fetal protection policy in International Union, the Franklin Covey insurance plan achieved a gender neutral discrimination based on fertility alone.136 Even though the Franklin Covey insurance plan covered all surgical infertility treatments performed on males but only some of those performed on females, the Second Circuit found the plan to be gender neutral because the excluded surgical impregnation procedures may treat either male or female infertility.137 The Second Circuit concluded, ““[B]ecause the exclusion of surgical impregnation procedures disadvantages infertile male and female employees equally, Saks’s claim does not fall within the purview of the PDA.”138 Despite the seeming inconsistency between the Eighth and Second Circuits and the Seventh Circuit, Hall confronts the decisions of the Eighth and Second Circuits peripherally and brushes them aside casually.139 The Seventh Circuit found little fault with Saks and Krauel. Indeed, the courts reached several common conclusions. The
134 Id. at 343. 135 Id. at 346. 136Id.; See also Int’l Union v. Johnson Controls, 499 U.S. 187, 198 (1991). 137 Saks, 316 F.3d at 347. 138 Id. at 346. 139 Hall v. Nalco, 534 F.3d 644, 648 (7th Cir. 2008)..
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Seventh Circuit accepts the Eighth and Second Circuit’s assertions that classifications based on fertility alone are gender neutral and therefore beyond the reach of the PDA.140 In fact, the Seventh Circuit even cites favorably to some of the core reasoning of Saks, noting the logic behind the Second Circuit’s contention that the PDA cannot extend protection to a classification simultaneously including equal numbers of both genders and remaining vulnerable to gender discrimination.141 The questions considered by the three courts are similar in a general sense—all three questions considered whether a woman alleging discrimination based on her pursuit of infertility treatments states a cognizable claim under the PDA.142 Furthermore the Seventh Circuit appears to reach a result that is diametrically opposed to those of the Eighth and Second Circuits: the Seventh Circuit finds the claim cognizable, while the Second and Eighth Circuits refuse to do so.143 Yet, the Seventh Circuit directly conflicts with the Eighth and Second Circuits on only two points: the application of the PDA to potential pregnancy and the application of International Union v. Johnson Controls to the facts of the case. On the question of the application of the PDA to potential pregnancy, the Seventh Circuit explicitly disagrees with the Eighth Circuit.144 With respect to this issue, the Eighth Circuit asserted that the PDA applies only after conception.145 The Second Circuit reserved
140 Id. 141 Id. 142Saks, 316 F.3d at 340-41; Hall, 534 F.3d at 645; Krauel v. Iowa, 95 F.3d 674, 675-676 (8th Cir. 1996). 143 Saks, 316 F.3d at 346; Hall, 534 F.3d at 649; Krauel, 95 F.3d at 679-680. 144 Hall, 534 F.3d at 648, n. 1. 145 Krauel, 95 F.3d at 679. This aspect of the Eighth Circuit’s reasoning became an integral part of that court’s ruling in In re Union, where the Eighth Circuit refused to require insurance coverage of contraceptives. In re Union Pac. R.R. Prac. Lit. 479 F. 3d 936, 942 (8th Cir. 2007). Interestingly, the Eighth Circuit’s assertion is at odds with its own case law. In Walsh v. National Computer Systems, Inc., 332 F.3d 1150, 1160 (8th Cir. 2003), the Eighth Circuit upheld a jury verdict awarded in response to a PDA claim brought by a woman who was “discriminated against. . .because she is a woman who had been pregnant, had taken a maternity
142 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 judgment on the issue.146 The Seventh Circuit however, stated, “[T]his argument . . . is specifically foreclosed by Johnson Controls, which explicitly recognized the applicability of the PDA to classifications based on “potential for pregnancy,” not just actual pregnancy.”147 In this respect, the Seventh Circuit’s reasoning is irreconcilable with the Eighth Circuit’s.148 However, the holdings of the two cases may still be distinguishable. Because the insurance plan at issue in Krauel excluded coverage for all infertility treatments,149 the Eighth Circuit could have decided the question by simply terming the exclusion a gender-neutral differentiation based on fertility.150 The Seventh Circuit also diverges from the Eighth and Second at the point that those two Circuits begin to differentiate their facts from those of International Union. After noting that the International Union decision implicitly allows discrimination based on fertility under the PDA,151 the Eighth and Second Circuits take distinctive approaches to distinguishing International Union.152 The Eighth Circuit points out that the exclusion of surgical impregnation procedures in its case, unlike the fetal protection policy in International Union truly achieved gender neutrality—the policy refused to cover any infertility treatments, whether designed to treat
leave, and might become pregnant again.” At the time of the litigation, however, the women had not yet become pregnant. Id. 146 Saks, 316 F.3d at 346. By expressly declining to consider whether an infertile female employee could state a claim under the PDA for an adverse employment action, the Second Circuit also declined to assert that potential pregnancy could never give rise to a cognizable PDA claim. Id. 147 Hall, 534 F.3d. at 648, n.1. 148 Id. The Seventh Circuit specifically refers to this aspect of the Eighth Circuit’s reasoning as “foreclosed by Johnson Controls.” Id. For additional discussion of the Eighth Circuit’s holding in Krauel, 95 F.3d at 674. 149 Krauel, 95 F.3d at 678. 150 See Int’l Union v. Johnson Controls, 499 U.S. 187, 198 (1991). 151 Krauel, 95 F.3d at 679-680. 152 Saks v. Franklin Covey, 316 F.3d 337, 345-346 (2d Cir. 2003); Krauel, 95 F.3d at 680.
143 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 males or females and no matter what caused the infertility.153 The Second Circuit had a slightly more difficult time. The policy at issue in Saks, after all, did provide coverage for some infertility treatments. The Second Circuit concluded, however, that the employer’s insurance policy achieved gender neutrality by refusing to cover surgical impregnation procedures whether the procedure was used to treat male or female infertility.154 In contrast, the Seventh Circuit determined that Hall mirrored the circumstances of International Union,155 employing the case in support of its argument that the PDA applies to potential pregnancy in general and to adverse employment actions arising from the pursuit of surgical impregnation procedures specifically.156 This inconsistency between the three cases creates two possibilities: either (1) either the Seventh Circuit or the Eighth and Second Circuits are incorrect, or (2) all three Circuits are correct and it is appropriate to view the pursuit of surgical impregnation procedures as a medical condition related to pregnancy in the context of adverse employment action while not conferring the same status in the context of insurance coverage. The Seventh Circuit observed no inconsistency in viewing an adverse employment action perpetrated due to an employee’s decision to undergo in vitro fertilization as a violation of Title VII as amended by the PDA, while simultaneously maintaining that there is no cognizable claim under the PDA against an employer who refuses to provide insurance coverage for surgical impregnation procedures.157 The Seventh Circuit viewed the question addressed to it as fundamentally different from the question considered by the Eighth and Second Circuit.158 The PDA, however, applies equally to discrimination in the form of adverse employment action and discrimination in the form of
153 Krauel, 95 F.3d at 680. 154 Saks, 316 F.3d at 347. 155 Hall v. Nalco, 534 F.3d 644, 647-648 (7th Cir. 2008). 156 Id. at 648. 157 Id. at 647-648. 158 Id. at 646.
144 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 unequal benefits or dissimilar access to fringe benefit programs.159 In relevant part, the Pregnancy Discrimination Act states,
[W]omen affected by pregnancy, childbirth, or related medical conditions shall be treated the same for all employment related purposes, including receipt of benefits under fringe benefit programs, as other persons not so affected by similar in their ability or inability to work, and nothing in section 2000e-2(h) of this title shall be interpreted to permit otherwise.160
The Act makes no distinction between discrimination through adverse employment action and discrimination through unequal provision of employment benefits. With respect to both adverse employment actions and benefits, discrimination on the basis of “pregnancy, childbirth, or related medical conditions,” is prohibited.161 Neither does the PDA provide any distinction between “related medical conditions” in the adverse employment action and “related medical conditions” in the benefits contexts.162 Although the plain language of the PDA makes no distinction between the benefits and the adverse employment action contexts, infertility treatments would not be the first characteristic to be treated differently with respect to insurance coverage and adverse employment actions. Abortion is specifically exempted from the medical conditions for which an employer must provide medical insurance benefits.163 The PDA includes a provision reading,
This subsection shall not require an employer to pay for health insurance benefits for abortion, except where the life of the mother would be endangered if the fetus were carried to term,
159 Pregnancy Discrimination Act, 42 U.S.C. § 2000e(k) (2005). 160 Id. 161 Id. 162 Id. 163 Id.
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or except where medical complications have arisen from an abortion.164
The Act makes no statement regarding the scope of protection offered to adverse employment actions perpetrated on the basis of an employee’s decision to receive an abortion.165 However, the Third Circuit and the Sixth Circuit have both concluded that adverse employment actions taken in response to an employee’s intent or decision to receive an abortion does give rise to a cognizable claim under the PDA.166 Both Circuits supported their decisions with legislative history, and EEOC Guidelines. The Legislative History of the PDA provides:
Because [the PDA] applies to all situations in which women are “affected by pregnancy, childbirth, and related medical conditions,” its basic language covers women who chose to terminate their pregnancies. This no employer may, for example, fire or refuse to hire a woman simply because she has exercised her right to have an abortion.167
In addition, the House Conference Report on the Pregnancy Discrimination Act suggests that women who chose to terminate a pregnancy are protected by the PDA. The Report states, “[N]o employer may, for example, fire or refuse to hire a woman simply because she has exercised her right to have an abortion.”168 Finally, the Third and Sixth Circuits relied on EEOC Guidelines promulgated in 1986. Those Guidelines indicate that abortion is a medical condition
164 Id. 165 Id. 166 Doe v. C.A.R.S. Prot. Plus, Inc., 527 F.3d 358 (3d Cir. 2008); Turic v. Holland Hosp., 85 F. 3d 1211 (6th Cir. 1996). 167 Turic, 85 F.3d at 1214 (quoting H.R. Conf. Rep. No. 95-1786, 95th Cong., 2d Sess. 4, reprinted in 1978 U.S.C.C.A.N. pp. 4749, 4765-66.) 168 H.R. Conf. Rep. 95-1786 (Oct. 13, 1978).
146 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 related to pregnancy in the limited context of adverse employment actions:
The basic principle of the [PDA] is that women affected by pregnancy and related conditions must be treated the same as other applicants and employees on the basis of their ability or inability to work. A woman is therefore protected against such practices as being fired…merely because she is pregnant or has had an abortion.169
The very specific discussion of abortion in the legislative history of the PDA and in the EEOC Guidelines provides an indication of Congressional intent on the issue. Given the unique treatment of abortion, it is not inconceivable that an employee’s pursuit of surgical impregnation would or would not give rise to a cognizable claim depending on the type of unequal treatment giving rise to claim. But abortion is accorded unique treatment precisely because it is a unique issue in the PDA context. Proponents of the PDA abortion exclusion provision strongly felt that “employers who are opposed to abortion should not be forced to, in effect, violate their personal moral conscience by financing payments for abortion.”170 Contemporary moral attitudes toward the use of infertility treatments would not seem to justify a specific exclusion for insurance coverage for surgical impregnation procedures.171 Although the specific language of the Act does not support the anomalous treatment of abortion, there is strong support in the legislative history of the PDA for doing so.172 There is no similar expression of Congressional intent with respect to surgical impregnation procedures,
169 Turic, 85 F.3d at 1213 (quoting 29 C.F.R. § 1604 (1986)). 170 Committee on Labor and Human Resources, 96th Cong., Legislative History of the Pregnancy Discrimination Act of 1978, at 113 (Comm. Print 1980) 171 But see Abel, supra note 93, at 849-850 (urging a more complete understanding of the moral and legal implications of infertility treatments before expanding PDA protection). 172 See supra text accompanying notes 167-168.
147 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 which were not widely available in 1978 when Congress enacted the PDA.173 Nevertheless, there is a logical distinction between infertility treatments in the context of insurance coverage and in the context of adverse employment action. The distinction relies upon the Seventh Circuit’s differentiation between childbearing capacity and fertility and is supported by the Supreme Court’s International Union. As the Supreme Court noted in City of L.A., Dept. of Water and Power v. Manhart, in the context of insurance benefits, “[t]reating different classes of risks as though they were the same for purposes of group insurance is a common practice that has never been considered inherently unfair.”174 So long as the insurance classification does not treat any person “in a manner which but for that person’s sex would be different,” there is no Title VII sex discrimination claim.175 An illustration of this reasoning occurs where an employer creates gender neutral distinctions between fertile and infertile individuals.176 So long as the distinction is truly gender neutral, the employer’s refusal to provide insurance coverage for infertility treatments can apply to men and women equally.177 In this circumstance, a woman may be potentially pregnant, but there is no differentiation on that basis. The class who suffers from the denial of fertility treatment insurance coverage includes men who are unable to father children as a result of their own infertility.178 Furthermore, consistent with the Supreme Court’s reasoning in Newport News, both the male and female employees bear the risk of their own infertility, and neither gender is
173 Van Voorhis, supra note 62, at 379 (noting the inception of IVF procedures in 1978 and its remarkable increase in use since). 174 City of L.A., Dept. of Water and Power v. Manhart, 435 U.S. 702, 710 (1978). 175 Id. at 711. 176 See International Union v. Johnson Controls, 499 U.S. 187, 198 (1991). 177 Bentley, supra note 10, at 394 (stating that statistically, 40% of all infertility cases are attributable to a female factor with a corresponding 40% of cases attributable to a male factor. The remaining 20% of infertility cases are attributable to a combination of male and female factors.) 178 Saks v. Franklin Covey, 316 F.3d 337, 346 (2d Cir. 2003).
148 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 treated more favorably than another.179 Therefore, the exclusion of surgical impregnation procedures from insurance coverage can be gender neutral, depending on the accompanying provisions of the policy.180 In addition, there may be good policy reason for excluding insurance coverage for infertility procedures. The cost of a single in vitro fertilization cycle runs from $7,000 to $10,000.181 Some estimates suggest that including coverage of fertility treatments in group health plans could increase the cost of these plans by as much as 3-5%.182 Other sources argue that the estimated cost of comprehensive infertility treatment coverage is overstated and may amount to as little as $3.14 per employee, per year.183 In the past, the Supreme Court has been wary of allowing cost justifications to justify gender discrimination. For instance, in International Union, the Supreme Court refused to allow the increased cost associated with hiring members of a particular sex to justify gender discrimination.184 However, the Supreme Court has not entirely foreclosed the possibility that financial concerns may be a weighty policy issue. In International Union, the Supreme Court carefully emphasized,
We, of course, are not presented with, nor do we decide, a case in which costs would be so prohibitive as to threaten the survival of
179 Newport News v. EEOC, 462 U.S. 669, 684 (1983). This approach raises the challenge, however, of ensuring that employer benefits plans are gender neutral both facially and in effect. For an argument that the Second Circuit wrongly determined that the Franklin Covey insurance plan avoided gender discrimination and that coverage exclusion of infertility treatments disparately impacts women, see Pendo, supra note 65, at 336-340. 180 Saks, 316 F.3d at 346. 181 Tarun Jain, Bernard L. Harlow, & Mark D. Hornstein,, Insurance Coverage and Outcomes of In Vitro Fertilization, 347 NEW ENG. J. MED. 661, 661 (2002). 182 Insure.com, Paying the Price for Infertility, http://www.insure.com/articles/healthinsurance/infertility-price.html (last visited Dec. 11, 2008). 183 Pendo, supra note 65, at 341. 184 Int’l Union v. Johnson Controls, 499 U.S. 187, 210-11 (1991).
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the employer’s business. We merely reiterate our prior holding that the incremental cost of hiring women cannot justify discriminating against them.185
If the costs of providing infertility treatments such as surgical impregnation procedures prove to be so costly as to force businesses to close their doors, the Supreme Court could determine that policy concerns excuse unequal treatment in this regard. In contrast, adverse employment action due to an employee’s intent to undergo surgical impregnations procedures cannot claim the same gender neutrality.186 Males may participate in the procedure by providing sperm, and male infertility may cause the need for the procedure,187 but only the female can undergo the procedure and only the female will bear the risk of adverse employment action arising from absences from work.188 As a result, “Employees terminated for taking time off to undergo IVF—just like those terminated for taking time off to give birth or receive other pregnancy-related care—will always be women.”189 As a result, the class is no longer gender neutral, and the woman who experiences an adverse employment action as the result of taking time off to undergo fertility treatments can state a cognizable claim under the Pregnancy Discrimination Act, although a woman who is denied insurance coverage for the same treatment may not have a claim.190
V. CONCLUSION
The Seventh Circuit’s novel decision in Hall v. Nalco, though employing a murky distinction between childbearing capacity and infertility and seeming to contradict the decisions of the Eighth and
185 Id. 186 Hall v. Nalco, 534 F.3d 644, 649 (7th Cir. 2008). 187 Bentley, supra note 10, at 397. 188 Hall, 534 F.3d at 648-649. 189 Id. 190 Id. at 649.
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Second Circuits, is nonetheless correct in its determination that an employee who is terminated for taking time off to undergo in vitro fertilization treatments states a cognizable claim under the Pregnancy Discrimination Act. The holding neither requires employers to begin providing insurance coverage for infertility treatments nor to provide special accommodations to women attempting to become pregnant through reproductive technology.191 The decision simply requires an employer to treat absence resulting from infertility treatments like any other non-occupational disability for sake of hirings, firings, and other employment actions.
191 The Pregnancy Discrimination Act does not require employers to make it easier for women to work. California Fed. Sav. & Loan Ass’n v. Guerra, 479 U.S. 272, 286-287 (1987). Rather, the PDA simply requires employers to treat pregnant and potentially pregnant workers in the same manner that they treat “similarly affected but non-pregnant workers.” Troupe v. May Dept. Stores Co., 20 F.3d 734, 738 (7th Cir. 1994). See also Committee on Labor and Human Resources, 96th Cong., Legislative History of the Pregnancy Discrimination Act of 1978, at 83 (Comm. Print 1980) (“The touchstone of compliance is equality of treatment, and any policy which affects pregnancy, childbirth, or related conditions must apply equally to other types of disabling conditions as well.”) But see Daniela M. de la Piedra, Flirting with the PDA: Congress must Give Birth to Accommodation Rights that Protect Pregnant Working Women, 17 COLUM. J. GENDER & L. 275 (2008) (arguing that employees experiencing pregnancy-related limitations should not be denied accommodations due to pregnancy-blind policies).
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LICENSE TO KILL (THE DREAM OF FAIR HOUSING): HOW THE SEVENTH CIRCUIT IN CRAIGSLIST GAVE WEBSITES A FREE PASS TO PUBLISH DISCRIMINATORY HOUSING ADVERTISEMENTS
∗ JOSEPH J. OPRON III
Cite as: Joseph J. Opron III, License to Kill (the Dream of Fair Housing): How the Seventh Circuit in Craigslist Gave Websites a Free Pass to Publish Discriminatory Housing Advertisements, 4 SEVENTH CIRCUIT REV. 152 (2008), at http://www.kentlaw.edu/7cr/v4-1/opron.pdf.
INTRODUCTION
The Fair Housing Act provides that it is unlawful “[t]o make, print, or publish, or cause to be made, printed, or published” advertisements for sale or lease of real property that discriminate against certain protected classes of persons.1 Passed in 1968, in the wake of a wave of urban riots caused, in no small part, because of housing inequality,2 the ban on discriminatory advertising has acted as
∗ J.D. candidate, May 2010, Chicago-Kent College of Law, Illinois Institute of Technology; B.A., Political Science, Oakland University. I would like to thank my Mom, Dad, Gram, Popa, and the rest of my family and friends for all of their love and support. Additionally, special thanks are owed to Dave, Kristopher, and Lori Opron for their help with this Note. 1 Civil Rights Act of 1968, 42 U.S.C. § 3604(c) (1968). 2 A survey taken of urban minorities in 1968 by the DETROIT FREE PRESS revealed that the number two cause of the 12th Street Riots in Detroit, Michigan, was “Poor Housing.” This factor was second only to police brutality and was more important than poverty, lack of jobs, and six other enumerated factors. JUNE MANNING THOMAS, REDEVELOPMENT AND RACE: PLANNING A FINER CITY IN
152 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 a first line of defense against discrimination and a mitigator of the devastating psychological effects of public displays of racism.3 Unfortunately, the Fair Housing Act’s prohibition against discriminatory advertisements has come under attack. In 1996, Congress passed the Communications Decency Act to protect children from websites that display inappropriate sexually oriented content.4 This act aimed to limit the liability of interactive computer service providers that attempt to screen inappropriate and illegal user- generated content from their websites.5 However, a misguided interpretation of this act made interactive computer service providers civilly immune as publishers and speakers of third party content, unlike their print media counterparts.6 Thus, a newspaper company has to screen its print edition for classifieds that violate the Fair Housing Act, but is free to post the discriminatory ads in their online edition. In many jurisdictions, the ultimate result has been that those wishing to find a place to discriminate based on race, color, religion,
POSTWAR DETROIT (CREATING THE NORTH AMERICAN LANDSCAPE) 130-131 (The Johns Hopkins University Press 1997). Additionally, a major cause of the Watts Riots of 1965 was the overturning of the Rumford Fair Housing Act of California, which mandated equality of opportunity for black home buyers. Valerie Reitman & Mitchell Landsberg, Watts Riots, 40 Years Later: Nine People who Were in the Midst of the Turmoil Recall how Six Days of Violence Changed Lives—and L.A. Itself, L.A. TIMES, Aug. 11, 2005, available at http://www.latimes.com/news/local/la-me-watts11aug11,0,7619426.story. Inequality of housing opportunity also played a pivotal role in the 1967 Newark Riots. Charisse Jones, Years Later, Lessons from Newark Riots to Be Learned USA TODAY, Nov. 19, 2006, available at http://www.usatoday.com/news/nation/2006-11-19- riots_x.htm. 3 For information regarding the psychological and physiological effects of racism see David R. Williams & Ruth Williams-Morris, Racism and Mental Health:The African American Experience, 5 ETHNICITY AND HEALTH 243, 243-68 (2000); Rodney Clark, Racism as a Stressor for African Americans: A Biopsychosocial Model, 54 AM. PSYCHOLOGIST. 805, 805-16 (1999). 4 Communications Decency Act of 1996, 47 U.S.C. § 230(c) (2000). 5 141 CONG. REC. H8469-H8470 (daily ed. Aug. 4, 1995) (statement of Rep. Cox). 6 Zeran v. Am. Online, Inc., 129 F.3d 327, 330 (4th Cir. 1997).
153 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 sex, handicap, familial status, or national origin are now only a mouse click away. In Chicago Lawyers’ Committee for Civil Rights Under Law, Inc. v. Craigslist, Inc., the Seventh Circuit held that an interactive computer service provider is not liable for unscreened, user-generated content displayed on its website.7 The court held that the Communications Decency Act mandates that an interactive computer service provider may not be held civilly liable as the publisher or speaker of user-generated content on its service. Thus, Craigslist could not be held liable under the Fair Housing Act’s ban on making, printing, or publishing discriminatory advertisements. Additionally, the court held that Craigslist did not cause the discriminatory postings to be “made, printed, or published.” Therefore, Craigslist was not liable under the Fair Housing Act’s housing advertisement regulations. Part I of this note will provide the historical and jurisprudential background for the Craigslist decision. Part II will examine the Seventh Circuit’s decision in Craigslist. Part III will argue that the Seventh Circuit reached the incorrect result in Craigslist because the court misinterpreted the Communications Decency Act and overlooked that Craigslist should have been liable under the Fair Housing Act for “making the discriminatory advertisements, notwithstanding Communications Decency Act immunity. Finally, Part IV argues that the court was incorrect to imply that public policy dictates that interactive computer service provider should be treated differently from other advertising mediums.
7 519 F.3d 666, 672 (7th Cir. 2008).
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I. BACKGROUND
A. The Fair Housing Act.
In June 1963, Dr. Martin Luther King, Jr. proclaimed, “[I]njustice anywhere is a threat to justice everywhere.”8 Dr. King explained that if injustice was to be defeated, America must set out to eliminate not only its overt manifestations but also its “subtle and hidden forms” such as “housing discrimination.”9 In reaction to the assassination of Dr. King10 and the plight of urban minorities, President Johnson signed into law the Civil Rights Act of 1968. Title VII of that act, commonly known as the Fair Housing Act,11 sought “to provide, within constitutional limitations, for fair housing throughout the United States.”12 Congress intended this act to “alter the whole character of the housing market.”13 Section 3604(c) of the Fair Housing Act prohibits the use of discriminatory housing advertisements. This ban is crucial to Congress’ goal of eliminating housing discriminations because it mitigates the harmful psychological effects of public displays of racism14 by making it illegal for sellers to announce their intent to discriminate. The pertinent part of the Fair Housing Act states that it is illegal:
To make, print, or publish . . . any notice, statement, or advertisement, with respect to the sale or rental of a dwelling that
8 Dr. Martin Luther King, Speech at the Great March on Detroit (June 23, 1963) (transcript and audio recording available at http://xroads.virginia.edu/%5C~PUBLIC/civilrights/a0121.html). 9 Id. 10 Jean Eberhart Dubofsky, Fair Housing: A Legislative History And Perspective, 8 WASHBURN L.J. 149, 160 (1968-1969) (identifying that Dr. King’s assassination encouraged the passage of the bill). 11 Fair Housing Act, 42 U.S.C. § 3601 note (2000). 12 42 U.S.C. § 3601. 13 Mayers v. Ridley, 465 F.2d 630, 652 (D.C. Cir. 1972). 14 See, Williams, supra note 3.
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indicates any preference, limitation, or discrimination based on race, color, religion, sex, handicap, familial status, or national origin, or an intention to make any such preference, limitation, or discrimination.15
Additionally, reflecting Congress’ intent to create a broad prohibition, the Fair Housing act provides that it is also illegal to cause discriminatory advertisements to be made, printed, or published.16 Courts have uniformly acknowledged that the test for determining whether a notice, statement, or advertisement violates § 3604(c) of the Fair Housing Act is whether it would indicate to an ordinary reader a discriminatory preference or limitation prohibited by the statute.17 Where this objective test is met, a plaintiff need not establish that the advertisement was made with a discriminatory intent.18 Moreover, Congress designed § 3604(c) using broad, sweeping language so it could be applied to “any publishing medium.”19 Thus, the ban on discriminatory advertising has been enforced in a wide variety of circumstances, including: newspaper advertisements,20 oral statements,21 signs,22 telecommunication devices for the deaf,23
15 42 U.S.C. § 3604(c). 16 42 U.S.C. § 3604(c) (emphasis added). 17 Jancik v. Dep’t of Hous. & Urban Dev., 44 F.3d 553, 556 (7th Cir. 1995) (noting that it is uniformly accepted that because the Fair Housing Act prohibits advertisements that indicate a discriminatory preference, courts should employ an objective, ordinary reader standard, notwithstanding the subjective intent of the author); Ragin v. New York Times Co., 923 F.2d 995, 999 (2d Dist. 1991) (citing United States v. Hunter, 459 F.2d 205, 215 (4th Cir. 1972)); see also Spann v. Colonial Vill., Inc., 899 F.2d 24, 29 (D.C. Cir. 1990) (utilizing an analogous reasonable reader standard). 18 Jancik, 44 F.3d at 556; Ragin, 923 F.2d at 999. 19 Hunter, 459 F.2d at 210-11. 20 Id. at 210. 21 Jancik, 44 F.3d at 556-557 (holding that oral statements can violate § 3604(c) of the Fair Housing Act). 22 Fair Hous. Cong. v. Weber, 993 F. Supp. 1286, 1291-92 (C.D. Cal. 1997). 23 United States v. Space Hunters, Inc., 429 F.3d 416, 419-421 (2d Cir. 2005).
156 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 racially restrictive covenants recorded by a recorder of deeds,24 and even visual advertisements with racially suggestive themes.25 However, the internet has become a devastating exception that threatens to render the Fair Housing Act ineffective. The Communications Decency Act has been inappropriately interpreted by numerous courts as precluding an interactive computer service provider from being considered a publisher or speaker of information provided by a third party. Thus, interactive computer service providers currently have no risk of liability under the Fair Housing Act’s ban on the publishing of discriminatory advertisements. At a time when the internet has emerged as a dominant and rapidly growing force in the real estate industry,26 this could prove to be a fatal blow to Congress’ goal of a discrimination free housing market.
B. The Communications Decency Act
In order to modernize an antiquated telecommunications regulatory scheme, Congress passed the Telecommunications Act of 1996. Section 230 of Title V of the Communications Decency Act aimed to protect interactive computer service providers “who take[] steps to screen indecent[] and offensive material for their customers.” 27 This section states in pertinent part:
SEC. 230. PROTECTION FOR PRIVATE BLOCKING AND SCREENING OF OFFENSIVE MATERIAL
24 Mayers v. Ridley, 465 F.2d 630, 633 (D.C. Cir. 1972). 25 Tyus v. Robin Constr. Corp., 1993 U.S. Dist. LEXIS 2791, 9-10 (N.D. Ill. Mar. 4, 1993). 26 Sam Diaz, On the Internet, A Tangled Web Of Classified Ads With So Many Sites, Sifting Is Difficult, WASHINGTON POST, Aug. 31, 2007, available at http://www.washingtonpost.com/wp- dyn/content/article/2007/08/30/AR2007083002046.html?hpid=sec-tech. 27 141 CONG. REC. H8469-H8470 (daily ed. Aug. 4, 1995) (statement of Rep. Cox).
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c. Protection for "Good Samaritan" blocking and screening of offensive material.
(1) Treatment of publisher or speaker. No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.
(2) Civil liability. No provider or user of an interactive computer service shall be held liable on account of (A) any action voluntarily taken in good faith to restrict access to or availability of material that the provider or user considers to be obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable, whether or not such material is constitutionally protected; or (B) any action taken to enable or make available to information content providers or others the technical means to restrict access to material described in paragraph (1).28
For the purposes of this act, the term interactive computer service means:
any information service, system, or access software provider that provides or enables computer access by multiple users to a computer server, including specifically a service or system that provides access to the Internet and such systems operated or services offered by libraries or educational institutions.29
Furthermore, an information content provider is defined as “any person or entity that is responsible, in whole or in part, for the creation
28 Communications Decency Act of 1996, 47 U.S.C. § 230(c) (2000) 29 47 U.S.C. § 230(f)(2).
158 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 or development of information provided through the Internet or any other interactive computer service.”30 There is no dispute that Craigslist, as a website operator, falls under the statutory definition of an interactive computer service. Furthermore, there is no dispute that the third party visitors to Craigslist’s fall under the statutory definition of information content provider. Thus, the issue lies in the effects of the statute’s provisions, not the applicability of the parties to its effects. Section 230(c)(1) immunity began to take shape in Zeran v. America Online.31 In Zeran, the Fourth Circuit considered the appeal of a customer of America Online who alleged that America Online: (1) unreasonably delayed in removing defamatory messages posted by third parties about him on America Online’s website, (2) wrongfully refused to post a retraction of those messages, and (3) failed to screen for future third-party-created defamatory messages.32 The Fourth Circuit held that “[b]y its plain language, § 230 creates a federal immunity to any cause of action that would make service providers liable for information originating with a third-party user of the service. . .and precludes courts from entertaining claims that would place a computer service provider in a publisher's role.”33 Furthermore, the Zeran court stated that the purpose of the Communications Decency Act was to minimize the threat that tort- based lawsuits pose to freedom of speech on the internet.34 Thus, the
30 47 U.S.C. § 230(f)(3). 31 Zeran v. America Online, Inc., 129 F.3d 327, 330 (4th Cir. 1997). 32 Id. at 328. 33 Id. at 330. 34 Id. The court assembled sparse comments made by Congresspersons about reducing government involvement in the regulation of inappropriate content on the internet. Id. However, the court failed to identify that this was not a call for free speech on the internet, but rather an attack on the Exon Amendment to the same bill that planned to use public rather than private forms of enforcement. For an overview of the Exon Amendment, see Robert Cannon, The Legislative History of Senator Exon’s Communications Decency Act: Regulating Barbarians on the Information Superhighway, 49 FED. COMM. L.J. 51, 57-64 (1996).
159 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 court held that the customer could not successfully maintain a negligence suit against America Online.35 The Zeran interpretation of § 230(c)(1) was largely accepted by the other federal circuit courts of appeals36 until the Seventh Circuit challenged the interpretation in Doe v. GTE Corp.37 In Doe, a group of varsity athletes alleged that hidden cameras were placed in their locker rooms, and videos of them were sold online.38 One of the parties named in the suit was the webhost, GTE Corporation (“GTE”).39 In considering potential liability for GTE’s role in the case, Judge Easterbrook provided, in dicta, two possible interpretations of the Communications Decency Act.40 First, he suggested that § 230(c)(1) could be read as a “definitional clause.”41 Thus, “an entity would remain a ‘provider or user’—and thus be eligible for the immunity under § 230(c)(2)—as long as the information came from somewhere else; but it would become a ‘publisher or speaker’ and lose the benefit of § 230(c)(2) if it created the objectionable information.”42 Second, Judge Easterbrook stated that “perhaps § 230(c)(1) forecloses any liability that depends on deeming the ISP a ‘publisher.’”43 However, the court ultimately decided that § 230(c) liability was not implicated in Doe and left the decision for another day.44 That day finally came in 2008 when Craigslist came before the Seventh Circuit.
35 Zeran, 129 F.3d at 332. 36 See Ben Ezra, Weinstein & Co., Inc. v. Am. Online, Inc., 206 F.3d 980, 986 (10th Cir. 2000); Blumenthal v. Drudge, 992 F.Supp. 44, 52 (D.C. Cir. 1998); Batzel v. Smith, 333 F.3d 1018, 1031 (9th Cir. 2003). 37 347 F.3d 655, 659-60 (7th Cir. 2003). 38 Id. at 656. 39 Id. 40 Id. at 659-60. 41 Id. 42 Id. 43 Id. 44 Id. at 660.
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II. CHICAGO LAWYERS’ COMMITTEE FOR CIVIL RIGHTS UNDER LAW, INC. V. CRAIGSLIST, INC.
A. District Court
“NO MINORITIES,” “only Muslims,” and “no children” are among the discriminatory messages contained in over 120 housing advertisements posted on Craigslist, Inc.’s website from July, 2005 to January 2006.45 These discriminatory advertisements formed the inspiration for the complaint filed by Chicago Lawyers’ Committee for Civil Rights Under Law, Inc. (“CLCCRUL”). CLCCRUL is a non- profit consortium of Chicago law firms that provides free legal services in civil rights cases, including those involving the Fair Housing Act.46 The defendant, Craigslist, Inc. (“Craigslist”), is a Delaware Corporation, whose business is founded upon its operation of a network of websites that facilitate advertising for a wide array of goods and services, including the sale and rent of housing.47 The CLCCRUL’s primary motivation for bringing suit was to seek a declaratory judgment that Craigslist, Inc.’s violated § 3601 of the Fair Housing Act.48 Additionally, the CLCCRUL asked the court to enjoin Craigslist from continuing to publish discriminatory advertisement and require that Craigslist take necessary precautions to screen for discriminatory advertisements.49 The CLCCRUL suggested that the court require Craigslist to adopt a publicly displayed anti-
45 Complaint, Chicago Lawyers’ Comm. for Civil Rights Under Law, Inc., v. Craigslist, Inc., 461 F.Supp2d 681, 698-99 (N.D. ILL. 2006) (No. 06 C 0657). 46 Id. 47 Id. 48 Id. 49 Id.
161 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 discrimination policy50 and employ computerized screening software.51 Craigslist argued that CLCCRUL’s complaint failed on the pleadings because Craigslist had immunity under §230(c)(1) of the Communications Decency Act.52 The District Court granted Craigslist’s motion for judgment on the pleadings.53 The court agreed with the defendant that the Communications Decency Act barred the defendants from being found liable for posting discriminatory user- generated content.54 The court reached this conclusion by utilizing its interpretation of the plain language of § 230(c)(1).55 The court rejected the holding of Zeran because it “overstates the ‘plain language’ of § 230(c)(1)” by announcing a broad immunity for claims against information content providers based on third-party content, irrespective of whether the claims involve liability as a publisher or speaker.56 Instead, the court found that the plain language of the bill only prohibits an interactive computer service provider from being held civilly liable as a publisher of third party content.57 The court stated that it was not important to determine if Congress intended the Communications Decency Act to apply outside the context of defamation suits.58 Instead, it was sufficient that the the plain language
50 To its credit, Craigslist now has an anti-discrimination policy that is displayed on its website, available at http://www.craigslist.org/about/FHA. 51 Complaint, Chicago Lawyers’ Comm. for Civil Rights Under Law, Inc., v. Craigslist, Inc., 461 F.Supp2d 681, 698-99 (N.D. ILL. 2006) (No. 06 C 0657). 52 Id. 53 Id. 54 Id. 55 Id. at 698. 56 Id. at 693-94. 57 Id. at 696. 58 As discussed below in Part III(A)(2), Congress expressly intended to legislatively overturn a line of defamation cases including Stratton Oakmont, Inc. v. Prodigy Services Co., 1995 WL 323710 (N.Y.Sup.), wherein courts held that treated interactive computer service providers as publishers because they tried to screen and restrict access to objectionable material on their sites.
162 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 was not at odds with Congress’ intent.59 The court stated that its plain language reading was “at least as harmonious with congressional intent” as the readings proffered by Craigslist and the CLCCRUL.60 Thus, the court found that its interpretation was proper and the CLCCRUL was thus precluded from bringing its claim against Craigslist as a publisher of the allegedly discriminatory advertisements.61 The District Court also briefly considered whether Craigslist could be found liable under one of the Fair Housing Act’s other prohibitions involving discriminatory housing advertisements.62 The court found that Craigslist did not make the discriminatory advertisements because they originated from users of Craigslist’s website.63 Furthermore, the court found that Craigslist did not print the discriminatory advertisements because when the statute was drafted, the plain meaning of the term print did not encompass computer based reproduction.64 Thus, the court held that Craigslist could not be found liable under any of the Fair Housing Act’s prohibitions against discriminatory advertisements.65
B. The Seventh Circuit’s Opinion
On appeal, the Seventh Circuit affirmed the District Court’s grant of judgment on the pleadings.66 First, the court found that the Communications Decency Act barred the defendants from being found liable as the “publisher or speaker” of the user-provided content posted
59 Chicago Lawyers’ Comm. for Civil Rights Under Law, Inc., v. Craigslist, Inc., 461 F.Supp2d 681, 696-97 (N.D. ILL. 2006) (N.D. ILL. 2006). 60 Id. 61 Id. at 698-99. 62 Id. at 698 n. 18. 63 Id. 64 Id. 65 Id. 66Chicago Lawyers’ Comm. for Civil Rights Under Law, Inc., v. Craigslist, Inc., 519 F.3d 666, 672 (7th Cir. 2008).
163 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 on its website.67 Second, the court held that Craigslist was not liable under the Fair Housing Act for causing the advertisement to be made, printed, or published.68 Finally, albeit in dictum, the court posited that several public policy considerations called for granting interactive computer service providers immunity for civil claims involving user- provided content.69 Although § 3604(c) of the Fair Housing Act is regularly enforced against newspapers and other publishers,70 the Seventh Circuit held that § 230(c)(1) of the Communications Decency Act precludes aggrieved parties’ ability to “sue the messenger” when the messenger is an interactive computer service provider.71 In reaching this conclusion, the court rejected both the CLCCRUL’s and Craigslist’s proposed interpretations of § 230(c)(1).72 The CLCCRUL advanced the position that § 230(c)(1) is applicable only to interactive computer service providers that engage in some sort of filtering, blocking, or screening of published information.73 It posited that § 230(c)(1) should be interpreted in light of the section’s title: “Protection for ‘Good Samaritan’ blocking and screening of offensive material.”74 The CLCCRUL stated that this narrower interpretation was necessitated by § 230(c)(2)’s focus on limiting civil liability for those who filter or screen objectionable material.75 It argued that nothing in § 230’s text or history suggested that Congress meant to immunize an information service provider from liability under the Fair Housing Act.76 Furthermore, there was no evidence that Congress even remotely contemplated discriminatory
67 Id. at 671. 68 Id. at 671-72. 69 Id. at 668-69. 70 Id. at 668. 71 Id. at 672. 72 Id. at 669-70. 73 Id. at 669. 74 Id. 75 Id. at 672. 76 Id. at 671.
164 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 housing advertisements when it passed §230.77 Conversely, Craigslist interpreted §230(c)(1) to provide interactive computer service providers with comprehensive civil liability from information posted on their services, notwithstanding any efforts to screen or block objectionable or illegal information.78 However, the Seventh Circuit affirmed the District Court’s opinion that §230(c)(1) neither grants broad based immunity nor limits immunity to interactive computer service providers that screen objectionable and illegal information.79 By engaging in what the court called a natural reading of § 230(c)(1), it held that “an online information system must not ‘be treated as the publisher or speaker of any information provided by’ someone else.”80 The court held that this precluded Craigslist from being held liable as a publisher or speaker of the allegedly discriminatory advertisements under the Fair Housing Act’s ban on “publishing” discriminatory housing advertisements.81 The court also considered the CLCCRUL’s alternative contention that Craigslist could also be found in violation of §3604(c) of the Fair Housing Act because it caused discriminatory advertisements “to be made, printed, or published.”82 The court admitted that Craigslist played a causal role in the publishing of the discriminatory advertisement.83 It explained that “no one could post a discriminatory ad if craigslist did not offer a forum.”84 However, the court held that this causal link was insufficiently proximate.85 It insisted that “[c]ausation in a statute such as §3604(c) must refer to causing a particular statement to be made, or perhaps the discriminatory content
77 Id. 78 Id. at 672. 79 Id. at 669. 80 Id. at 671. 81 Id. at 672. 82 Id. at 671. 83 Id. 84 Id. 85 Id.
165 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 of a statement.”86 The court held that an idle publisher cannot be one who causes a statement to be made.87 Therefore, the court held that Craigslist could not be found to have the requisite causal relationship under §3604(c) because the record did not show that it offered any inducement for anyone to post discriminatory advertisements.88 Finally, Chief Judge Easterbrook spent a substantial portion of the opinion providing dictum on the public policy reasons for absolving Craigslist of liability as a publisher or speaker.89 First, Chief Judge Easterbrook argued that online services are not analogous to newspaper classifieds, against which courts regularly enforce §3604(c) of the Fair Housing Act.90 Without elaboration, the court admitted that online services share some common characteristics as a classified section of a newspaper.91 The court then compared online service providers to both telephone services and courier services such as FedEx and UPS.92 Without further explanation, the court proclaimed that craigslist neither made nor published any information transmitted through its service.93 Thus, the court implied that interactive computer service providers should not be held to the same standard as newspapers.94 Second, the court suggested that the screening of user-generated- content may raise first amendment issues.95 The court noted that § 3603(b)(1) of the Fair Housing Act allows owners of single-family homes who do not own more than three single-family homes to discriminate against the otherwise protected classes of people for
86 Id. 87 Id. 88 Id. at 671-72. 89 Id. at 668-69. 90 Id. at 668. 91 Id. 92 Id. 93 Id. 94 Id. 95 Id.
166 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 whatever reason during the sale of their property.96 However, the court recognized that this exemption does not apply to discriminatory advertisements under § 3604(c) of the Fair Housing Act.97 Despite its recognition, the court argued that “any rule that forbids truthful advertising of a transaction that would be substantively lawful encounters serious problems under the first amendment.”98 Third, the court argued that the screening of user-generated content may not be effective.99 First, the court stated that simple word filters would not work.100 For example, a simple filter would block color words such as white or black that may or may not be racially descriptive.101 Second, the court argued that human reviewers may be equally poor at filtering out violative advertisements from legally permissible posts.102 Finally, the court stated that screening postings would be economically inefficient for craigslist.103 The court argued that requiring Craigslist to screen its nearly 30 million posts per month would be prohibitively expensive because the posts would have to be reviewed by Craigslist’s staff of fewer than 30 employees.104 Thus, either Craigslist would have to increase its staff, and therefore, its operating costs, or accept a long delay in posting time which would make the service much less useful.105
96 Id. 97 Id. 98 Id. 99 Id. at 668-69. 100 Id. at 669. 101 Id. at 668-69. 102 Id. at 669. 103 Id. at 668-69. 104 Id. 105 Id. at 669.
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III. THE SEVENTH CIRCUIT ERRED IN CRAIGSLIST BY MISINTERPRETING THE COMMUNICATIONS DECENCY ACT AND INCORRECTLY HOLDING THAT CRAIGSLIST DID NOT FALL UNDER THE COVERAGE OF THE FAIR HOUSING ACT.
This section argues that Craigslist should have been held liable under the Fair Housing Act for its role in the discriminatory housing advertisements at issue. First, the Seventh Circuit incorrectly declared blanket immunity for interactive computer service providers posting user generated content. Second, the court could have alternatively found Craigslist liable under the Fair Housing Act as one who made the discriminatory advertisements.
A. The Seventh Circuit erred by basing its holding on a misinterpretation of the Communications Decency Act
In Craigslist, the Seventh Circuit killed the dream of a discrimination-free housing market. And worse, it did so by utilizing an anachronistic textualist method of statutory interpretation. The court viewed the Communications Decency Act as if it were drafted in a vacuum, devoid of historical and jurisprudential context and legislative history. The following sections seek to illuminate the errors of the court’s use of this short-sighted mode of statutory interpretation. Part 1 of this section begins, as all proper statutory interpretation should, by analyzing the text of the Communications Decency Act. Next, Part 2 puts the text of the statute in its proper context by identifying the legislative history of the Act. Finally, Part 3 applies this foundational material to prevailing canons of statutory interpretation to reveal that the Communications Decency Act precludes civil liability only where an interactive computer service provider screens its site for inappropriate and illegal material.
1. Textual Analysis of the Communications Decency Act
Although an examination of a statute’s text is not an end in and of itself, it is the proper starting point for statutory interpretation. This
168 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 section argues that under a thorough textual analysis of the Communications Decency Act, an interactive computer service provider would be precluded from being treated as the publisher and/or speaker of user-generated content for the purposes of civil liability only where: (1) the information being presented was generated by a third party, and (2) the provider makes efforts to screen objectionable and illegal material. For a case of such magnitude, that put the civil rights of so many in the balance, Craigslist’s textual analysis is contemptuously short. Section 230(c)(1) states that “[n]o provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” The court held that because “[S]ubsection (c)(2) does not deal with the liability of speakers and publishers” it read § 230(c)(1) as an autonomous provision. Craigslist held that “[a] natural reading of § 230(c)(1)” precluded an interactive computer service provider from being held liable as a publisher or speaker of third party content, notwithstanding any attempts to filter inappropriate or illegal material.106 However, nowhere in the opinion does the court explain why its reading is a natural reading, nor does it affirmatively refute why other possible readings are inferior. Despite the court’s silence, there is another plausible and more logical interpretation of § 230. The whole act rule is a common rule of statutory interpretation utilized by proponents of virtually every doctrine of statutory interpretation. It provides that “Statutory construction. . .is a holistic endeavor. A provision that may seem ambiguous in isolation is often clarified by the remainder of the statutory scheme. . .because only one of the permissible meanings produces a substantive effect that is compatible with the rest of the law.”107 To apply the whole act rule, it is pertinent to identify each of the Communications Decency Act’s components. The title of the
106 Id. at 670-671. 107 United Sav. Ass’n v. Timbers of Inwood Forest Associates, Ltd., 484 U.S. 365, 371 (1988).
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Communications Decency Act reads, “PROTECTION FOR PRIVATE BLOCKING AND SCREENING OF OFFENSIVE MATERIAL.”108 An ordinary reader would expect that the material under such a heading would be qualified by or directly related to the protection for private blocking and screening of offensive material. Moreover, this assumption is strengthened by the title of § 230(c) that reads, “Protection for ‘Good Samaritan’ blocking and screening of offensive material.”109 Next, § 230(c)(1), the portion of the statute at issue in Craigslist, states that “[n]o provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” Finally, § 230(c)(2) outlines the civil liability for providers of an interactive computer service that “restrict access to … obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable” material.110 When the whole act rule is applied to the Communications Decency Act, it is apparent that the court should have accepted the CLCCRUL’s interpretation of the text of the Act. First, it would be illogical to assume that Congress intended to place a wholly independent clause in the middle of an act whose title, subsection title and other provision all share the common theme of screening of offensive material. Second, the effect of such a reading is inconsistent with the text of the other sections. The other sections of the Communications Decency Act make a quid-pro-quo offer of legal protection in return for interactive computer service provider’s screening of certain material.111 The government’s consideration in this bargain is forfeited if § 230(c)(1) is interpreted, as it was by Craigslist, as offering this protection up for free. Although it is possible that this was the Congress’s intent, it is certainly more logical to assume that, given the text surrounding § 230(c)(1) the government
108 Communications Decency Act of 1996, 47 U.S.C. § 230 (2000). 109 47 U.S.C. § 230(c). 110 47 U.S.C. § 230(c)(2). 111 This is evidenced by the operative word for, which appears in both the title of § 230 and § 230 (c).
170 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 intended to get its part of the legislative bargain. Thus, taken together, § 230(c)(1) should be read to apply to interactive computer service providers only when they engage in screening of offensive material. As illustrated in the background section of this Note, the CLCCRUL’s principal complaint with Craigslist’s behavior was that Craigslist did not engage in any type of screening for the discriminatory housing classifieds that were being posted on its site. Because a proper textual analysis would hold that Craigslist would only be precluded from civil liability as a publisher or speaker when it screens offensive and illegal material, the court should have held that Craigslist was in violation of the Fair Housing Act. However, a statutory interpretation that considers only the text of a statute is short- sighted because it presumes that a legislature was perfect in articulating its desires through the language it used. Because this is an unrealistic presumption, it is pertinent that a statutory analysis consider contextual evidence such as legislative history. Moreover, even unapologetic proponents of textualism, who adamantly devalue the weight of legislative history, recognize that in some instances there is value in examining legislative history to aid in interpreting the meaning of an ambiguous statute. 112 As textualism proponent Judge Easterbrook wrote in In re Sinclair, “[c]larity depends on context, which legislative history may illuminate. The process is objective; the search is not for the contents of the authors’ heads but for the rules of language they used.”113 In the instant case, there is ambiguity as to which rules of language Congress used in drafting the Communications Decency Act. The court’s interpretation states that a § 230(c)(1) is a stand-alone sentence that is properly interpreted notwithstanding the surrounding text and title of the act. Conversely, CLCCRUL’s position posited that the drafters intended to qualify § 230(c)(1) with the surrounding text and title of the act. Although, as demonstrated in the preceding paragraphs, the
112 See Green v. Bock Laundry, 490 U.S. 504, 527 (1989) (Scalia, J., concurring) (proclaiming that where a statute produces an absurd result, it is “entirely appropriate to consult all public materials” including the background of a rule and its legislative history). 113 870 F.2d 1340, 1342 (7th Cir. 1989).
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CLCCRUL’s textual interpretation is logically superior to the court’s interpretation, there exists a genuine question of linguistic construction. Thus, as even Chief Justice Easterbrook’s prior holding dictates, this ambiguity should be resolved by an examination of the legislative history of the Act.
2. Legislative History of the Communications Decency Act
Legislative history114 is commonly regarded as the focal point of traditional Anglo-American theories of statutory interpretation.115 Furthermore, despite attempts by textualists to virtually eliminate the role of legislative history in statutory interpretation, a majority of commentators remain champions of the modes of interpretation that highlight legislative intent.116 In the instant case, the legislative history of the Communications Decency Act provides support for the position that the Act was meant to apply to an interactive computer service provider only when it takes an affirmative effort to screen illegal and offensive material from its websites. The Cox-Wyden amendment to Title V of the Telecommunications Act of 1996 became § 230(c) of the Communications Decency Act. This amendment was inspired by what congress felt was an unjust result in Stratton Oakmont, Inc. v. Prodigy Services Co.117 Thus, it is pertinent to consider the Prodigy decision.
114 For the purposes of this note, the term legislative history will utilize its commonly accepted definition: “the internal legislative pre-history of a statute – the internal institutional progress of a bill to enactment and the deliberation accompanying that progress.” WILLIAM N. ESKRIDGE ET AL., CASES AND MATERIALS ON LEGISLATION STATUTES AND THE CREATION OF PUBLIC POLICY 971-72 (4th ed. 2007). 115 WILLIAM N. ESKRIDGE, LEGISLATION AND STATUTORY INTERPRETATION 221 (2d ed. 2006). 116 See Eskridge, supra note 115, at 990. 117 141 CONG. REC. H8469-H8470 (daily ed. Aug. 4, 1995) (statement of Rep. Cox) (expressing discontent at increased liability for Prodigy because it took affirmative steps to screen material in violation of its terms of use).
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In Prodigy, a securities investment banking firm, Stratton Oakmont, Inc., brought claims against Prodigy Services Company (“Prodigy”) for per se libel, among other things.118 The main issue before the Prodigy court was whether Prodigy was a publisher of allegedly libelous statements posted by third party users on Prodigy’s popular electronic message board, Money Talk”119 The finding of Prodigy as a publisher rather than a mere distributor of third party information was central to Stratton Oakmont’s defamation claims because one who repeats or otherwise republishes a libel is subject to liability as if he had originally published it.120 However, one who merely relays a libel is liable only if they knew or had reason to know of the libelous statements.121 Thus, the court set out to determine if Prodigy exercised enough editorial control over its computer bulletin board to render it a publisher, and thus, subject it to the same editorial responsibilities as a newspaper. 122 The court found that Prodigy was a publisher of its users’ content because it: (1) held itself out to the public and its members as controlling the content of its bulletin boards, and (2) implemented control over the boards by utilizing technology and manpower to delete offensive postings.123 The court explained that Prodigy would not have been held liable as a publisher but for these affirmative steps to control the content of its bulletin board.124 The court justified this position by placing Prodigy’s decision to monitor its board within the framework of free-market economic theory.125 The court presumed
118 Stratton Oakmont, Inc. v. Prodigy Services Co., 1995 WL 323710, at *1 (N.Y.Sup. Ct. 1995). 119 The statements at issue in Prodigy included accusations that Stratton Oakmont had committed criminal and fraudulent acts in connection with the initial public offering of stock of Solomon-Page Ltd. Id. 120 Id. at *3. 121 Id. 122 Id. 123 Id. at *4. 124 Id. at *5. 125 Id. Free-market economic theory generally posits that it is preferable to conduct economic activity through voluntary private exchange rather than
173 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 that Prodigy screened the content of its bulletin boards in order to profit over its competitors by becoming a more family-oriented service, not for altruistic reasons.126 Thus, the court stated that Prodigy must also face the legal consequences of its screening.127 In Prodigy, this meant that Prodigy was liable as a publisher for the allegedly libelous statements.128 In response to Prodigy, Rep. Christopher Cox, co-sponsor of the Cox-Wyden amendment that became § 230 of the Communications Decency Act, stated that the amendment would take measures to make sure that good samaritan screening would be rewarded rather than being punished.129 Impliedly unconvinced by Prodigy’s free-market solution, Cox stated that the amendment would “protect computer Good Samaritans, online service providers, [and] anyone. . .who takes steps to screen indecency and offensive material for their customers. . .from taking on liability. . .that they should not face. . .for helping us solve this problem.” 130 Thus, Cox sought to make a deal with private companies. He saw the bill as an exchange of immunity from liability in situations such as Prodigy where interactive computer service providers, such as Prodigy, are willing to take an active role in screening “things not only prohibited by law, but prohibited by parents.”131 This incentive based approach stands in direct contrast to Prodigy’s free-market approach and Craigslist’s interpretation of
government intervention. See, MILTON FRIEDMAN, CAPITALISM AND FREEDOM (1968). For a compelling and detailed critique free-market economic theory see KARL POLANYI, THE GREAT TRANSFORMATION: THE POLITICAL AND ECONOMIC ORIGINS OF OUR TIME 35 (2d ed. 2001) (stating that “[i]t should need no elaboration that a process of undirected change. . .should be slowed down, if possible, so as to safeguard the welfare of the community”). 126 Id. 127 Id. 128 Id. at *4. 129 141 CONG. REC.. H8469-H8470 (daily ed. Aug. 4, 1995) (statement of Rep. Cox). 130 Id. 131 Id.
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§ 230(c)(1) of the Communications Decency Act because neither of them provide incentive to undertake the costly process of screening. Other members of Congress also echoed their support for Cox’s vision of the bill. Representative Pat Danner stated that she strongly supported the efforts taken “to address the problem of children having untraceable access through on-line computer services to inappropriate and obscene pornographic materials available on the Internet.”132 Similarly, Rep. Robert Goodlatte praised the amendment because it “removes the liability of providers such as Prodigy who currently make a good faith effort to edit the smut from their systems. It also encourages the online services industry to develop new technology, such as blocking software, to empower parents to monitor and control the information their kids can access.”133 Additionally, Cox stated that the bill will “establish as the policy of the United States that we do not. . .wish to have a Federal Computer Commission with an army of bureaucrats regulating the Internet.” Id. Although this statement resembles laissez-faire, free-market rhetoric, it should not be read to imply that Cox would have accepted the Craigslist court’s position that the plain meaning § 230(c)(1) of the Communications Decency Act, granting publishers and speakers immunity notwithstanding their efforts to screen inappropriate material, is consistent with the intent of Congress. The court’s reading of § 230(c)(1) creates a disincentive for publishers or speakers to engage in screening of public material much like the way the Prodigy court’s free-market prescription to the problem of liability for libelous statements did. Under the Prodigy free-market approach, an interactive computer service provider that screens is considered a publisher for purposes of liability. Similarly, under the Craigslist court’s interpretation of § 230(c)(1) of the Communications Decency Act, an interactive computer service provider always has civil liability for publishing third party content. Thus, there is no incentive to engage in costly screening efforts. As noted above, Congress explicitly rejected
132 Id. 133 Id.
175 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 this type of prescription in favor of a more incentive-based solution which offers immunity in return for screening. In sum, the legislative history of the Communications Decency Act supports the CLCCRUL’s reading of § 230(c)(1). Although there is an ambiguity in the text of that section, the legislative history shows that CLCCRUL was correct to suppose that Congress intended § 230(c)(1) was to be read in light of the surrounding provisions. Thus, an interactive computer service provider should only be offered immunity under that section of the Communications Decency Act only where it takes affirmative efforts to screen illegal and offensive material from its services.
3. Analysis
The section above detailed substantial support from the text and legislative history of the Communications Decency Act for the position that the Act’s § 230(c)(1) immunity applies only to interactive computer service providers that screen for offense material. This section applies familiar principals of statutory interpretation to this evidence to demonstrate why the Act’s immunity should be so limited. First, it is pertinent to recognize that the Communications Decency Act is wholly devoid of any mention of the Fair Housing Act, civil rights, or any other federal laws.134 In Craigslist, Chief Judge Easterbrook admitted that “Congress did not even remotely contemplate discriminatory housing advertisements when it passed § 230.”135 Moreover, the court noted that “nothing in § 230's text or history suggests that Congress meant to immunize an interactive computer service providers from liability under the Fair Housing Act.”136 At this point in the court’s analysis, it would have been proper for Chief Judge Easterbrook to acknowledge the familiar rule against
134 Chicago Lawyers’ Comm. for Civil Rights Under Law, Inc., v. Craigslist, Inc., 519 F.3d 666, 672 (7th Cir. 2008). 135 Id. 136 Id.
176 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 repeals by implication which states that “Congress does not create discontinuities in legal rights and obligations without some clear statement.”137 In Craigslist, the court’s interpretation of the Communications Decency Act has left § 3604(c) of the Fair Housing Act fragmented despite absence of any evidence of framer’s intent to do so.138 Once a universally broad statute,139 applying to “any publishing medium,”140 it is now powerless against interactive computer service providers that are distinguishable only because their information can be found on internet rather than in paper-based or verbal forms. Therefore, applying the rule against repeals by implication, the court should have held that the CDA does not fragment the coverage of the Fair Housing Act by giving a free pass to interactive computer service providers who do not engage in screening for offensive material. To not follow this principle of statutory interpretation would beg the absurd result that a newspaper company would be required to screen classified housing advertisements for its print edition but could publish discriminatory advertisements free from liability in its online edition. Notwithstanding this illogical result, the court held that Congress’ silence regarding the Fair Housing Act was inconsequential.141 The court declared that in order to exclude the Fair Housing Act from the reach of § 230(c)(1) of the Communications Decency Act, Congress must have explicitly stated that it was excluded.142 In support, the court cited the rule that “Congress need not think about a subject for a law to affect it; effects of general rules continue unless limited by
137 Finley v. United States, 490 U.S. 545, 554 (1989). See also Green v. Bock Laundry, 490 U.S. 504, 521-22 (1989). 138 Craigslist, 519 F.3d at 671. 139 The Fair Housing Act explicitly states that its purpose is “to provide, within constitutional limitations, for fair housing throughout the United States.” 42 U.S.C. § 3601 (2000). 140 U.S. v. Hunter, 459 F.2d 205, 210-11 (4th Cir. 1972). 141 Craigslist, 519 F.3d at 671. 142 Id. at 671.
177 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 superseding enactments.”143 The court reasoned that the Communications Decency Act is a general statue because of Congress’ use of the word “information” in §230(c)(1).144 The court recognized that the impetus of the statute was to protect interactive computer service providers, like Prodigy, from being punished for good samaritan screening of inappropriate content.145 However, it argued that by utilizing the word “information” instead of expressly indentifying what types of information the Communications Decency Act covers, the Act was intended to have a general application.146 Thus, the court interpreted Communications Decency Act to apply to the Fair Housing Act despite Congress’ silence on the subject.147 The Craigslist court failed to consider that congress expressly stated the Communications Decency Act’s intended effect on other laws in § 230(e) of the Communications Decency Act. 148 In Section § 230(e)(3), the court identified the statute’s intended effect on state law by stating, “[n]o cause of action may be brought and no liability may be imposed under any State or local law that is inconsistent with this section” However, nowhere does the statute make note of its intended effect on inconsistent federal law. Where the legislature is silent regarding the effect legislation will have on a legal rule, there is a presumption that a prior legal rule should be retained.149 Congress was silent regarding the Fair Housing Act. Thus, it is proper to
143 Id. (citing a descriptive parenthetical from Regional Rail Reorganization Act Cases, 419 U.S. 102, 126-127 (1974). 144 Id. at 671. 145 Id. 146 Id. 147 Id. 148 Communications Decency Act of 1996, 47 U.S.C. § 230(e) (2000). 149 Zuni Pub. Sch. Dist. No. 89 v. Dep’t of Educ., 127 S.Ct. 1534, 1541 (2007) (holding that there is a presumption that a prior legal rule should be retained if no one in legislative deliberation even mentioned the rule); Shine v. Shine, 802 F.2d 583, 587 (1d Cir. 1986) (stating that where the legislature is silent regarding a particular effect of a bill, the bill should not be read to effect a reversal of the long- standing principles governing an area of law because “[s]uch a reversal would surely have been noted in the congressional discussions.”).
178 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 interpret the Communications Decency Act to not impact the allegedly inconsistent, well-settled Fair Housing Act. The Craigslist court offered an alternative basis for ignoring the supportive legislative history and textual construction of the Communications Decency Act. The court argued that although the impetus of the statute was to protect interactive computer service providers who screen offensive content, “[o]nce the legislative process gets rolling, interest groups seek (and often obtain) other provisions.”150 Thus, the court implied that Congress changed its goals for the Communications Decency Act to offer immunity to all interactive computer service providers notwithstanding any effort to screen offensive material. Although interest groups play a regrettably prevalent role in our legislative process, the court was hasty to imply that this is the only possible explanation for the wording of § 230(c)(1).151 In fact, it is also common to our legislative process that the legislature makes mistakes and simply drafts poorly worded bills.152 Furthermore, albeit less likely, sheer laziness on behalf of the drafters of the Cox-Wyden amendment could account for their choice to use the word information instead of including every possible type of inappropriate or illegal material. Finally, the drafters could have presumed that the use of the broad term “information” would not be problematic as it was quite obvious by the legislative history and the statutory construction of the amendment that it was intended to be applied to offensive material.153 Each of these explanations for Congress’ word choice is superior to the court’s explanation because the court’s explanation is mere conjecture. There is nothing in the legislative history that suggests
150 Craigslist, 519 F.3d at 671. 151 Although the court may have had another explanation, it failed to articulate it in Craigslist. 152 Green v. Bock Laundry, 490 U.S. 504, 527 (1989) (noting that if the words of a statute were given their plain meaning, the statute would necessitate an unconstitutional result). 153 47 U.S.C. § 230(c). See also 47 U.S.C. § 230(c)(2) (expressly identifying types of “offensive material” such as that which is “obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable”); See also supra Part III(a)(2).
179 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 interest group lobbying for favorable provisions, nor is there any mention whatsoever of affording any type of immunity to online service providers who do not provide the public with good samaritan screening. Absent such evidence, there is no reason to accept the court’s argument that any lobbying took place that changed Congress’ intended application of the Act. Finally, an ambiguous statute should not be interpreted to restrict rights granted by a prior statute unless restricting those rights is necessary to execute the new statute’s purpose. As stated above, the purpose of the Communications Decency Act was to encourage interactive computer service providers to screen objectionable material by offering them civil immunity as a publisher or speaker when they engage in such screening. The purpose of § 3604(c) of the Fair Housing Act was to mitigate the harmful psychological effects of racism and frustrate the efforts of those seeking to discriminate against the protected classes of persons in the sale or rent of housing. The court’s interpretation frustrates the purpose of the Fair Housing Act by turning the internet into an arena for discriminatory housing advertisements by providing the websites that host them civil immunity. Furthermore, the court’s interpretation runs counter to the purpose of the Communications Decency act because it provides a disincentive for websites, like Craigslist, to screen illegal content, such as discriminatory housing advertisement, from their websites. Thus, under the court’s interpretation of the Communications Decency Act, neither statute’s purpose is fulfilled. In contrast, CLCCRUL’s proposed interpretation of the Communications Decency Act fulfils the purposes of both statutes. The CLCCRUL’s interpretation provides that unless an interactive computer service provider uses some form of screening, it has no immunity.154 This interpretation fulfills the purpose of the Communications Decency Act because it encourages interactive computer service providers to screen inappropriate and illegal content by rewarding them with immunity from civil liability. Furthermore, the CLCCRUL’s interpretation allows the purpose of the Fair Housing
154 Craigslist, 519 F.3d at 669.
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Act to be carried out by not frustrating its current state of universal applicability.155 In contrast, the court’s interpretation of the Communications Decency Act tramples upon the rights guaranteed by the Fair Housing Act by exempting interactive computer service providers which make up a large and rapidly growing segment of the market for housing advertisement. Therefore, because the court’s interpretation is not necessary, and in fact contrary, to achieving the purpose of the Communications Decency Act, the court’s interpretation should have been rejected in favor of CLCCRUL’s interpretation which suffers from neither of these deficiencies. As this section demonstrates, the textual construction of the Communications Decency Act, its legislative history, and even the admission of Chief Judge Easterbrook reveal that Congress had no intention of making it an end-run around liability under the Fair Housing Act’s provision against publishing discriminatory advertisements. And even if one should feel so strongly about the single canon of statutory interpretation utilized by the court that one thinks it should prevail over the several other more applicable canons listed above, it should be remembered that “a thing may be within the letter of the statute, and yet not within the statute, because it is not within its spirit, nor the intention of its makers.”156 Although there are those that would disagree with this axiomatic principal, we would be remiss to follow their lead and suffer such absurd and painful results as those that will be discussed in Section IV below.
B. Alternative theories for liability under the Fair Housing Act
1. The Scope of the Fair Housing Act
The Craigslist court held that the Communications Decency Act provided Craigslist civil immunity from being treated as the
155 However, because intent is not necessary for liability under the Fair Housing Act, this too could be seen as a restriction on the Fair Housing Act’s reach. 156 Holy Trinity Church v. United States , 143 U.S. 457, 459 (1892).
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“publisher” or “speaker” of user provided content.157 The court then swiftly, and without justification, declared that only “as [a] publisher could Craigslist be liable” under the Fair Housing Act.158 However, as this section demonstrates, the court drew a hasty conclusion. The Fair Housing Act’s ban on discriminatory advertisements, notices, and statements is broad.159 It covers not only those who publish discriminatory advertisements, notices, and statements, but also those who print them, make them, or cause them to be made, printed, or published.160 It is a well known canon of statutory interpretation that each phrase in a statute must, if possible, be given effect.161 Furthermore, another well-settled canon of statutory interpretation states that courts should avoid interpreting a provision in a manner that renders other provisions superfluous.162 Thus, although the actions prohibited by the Fair Housing Act may seem almost indiscernible at first glance, it is important that each word be interpreted to give effect to its inherently distinct meaning. Perhaps the most highly litigated action prohibited under § 3604(c) of the Fair Housing Act is publishing. In 1968, when the Fair Housing Act was passed, the word publish meant “[t]o make public; to circulate; to make known to the people in general.”163 In the instant case, the discriminatory advertisements were made public by Craigslist posting them on their website. However, under the court’s interpretation of the Communications Decency Act, an interactive computer service provider is precluded from civil liability for publishing third-party content. Thus, if one accepts the court’s interpretation, Craigslist is immune for its activities as a publisher. Section 3604(c) also makes it illegal to print discriminatory advertisements. As the district court pointed out in Craigslist, when
157 Craigslist, 519 F.3d at 671. 158 Id. 159 United States v. Hunter, 459 F.2d 205, 210-11 (4th Cir. 1972). 160 Fair Housing Act, 42 U.S.C. § 3604(c) (2000). 161 United States v. Menasche, 348 U.S. 528, 538-539 (1955). 162 Walters v. Metro. Educ. Enters., Inc., 529 U.S. 202, 208-209 (1997). 163 BLACK’S LAW DICTIONARY 1297 (Revised 4th ed. 1968).
182 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 the drafter’s of the Fair Housing Act passed the bill in 1968, to print meant simply to “[t]o stamp by direct pressure as from the face of types, plates, or blocks covered with ink or pigments, or to impress with transferred characters or delineations by the exercise of force as with a press or other mechanical agency.”164 The Communications Decency Act is silent regarding interactive computer service provider immunity for “printing.” Nonetheless, Craigslist’s actions do not fit the Fair Housing Act’s prohibition because creating a computer file and placing it on a server is highly dissimilar to applying ink to paper. Thus, Craigslist could not be held liable under this part of § 3604(c). Furthermore, the Fair Housing Act makes it illegal to cause a discriminatory advertisement to be made, printed, or published. In 1968, the word cause meant to be the occasion of or “to effect as an agent”165 The Craigslist court rejected the claim that Craigslist could be liable for causing the advertisements to be made, printed, or published.166 The court stated that, “causation in a statute such as § 3604(c) must refer to causing a particular statement to be made or perhaps the discriminatory content of a statement.”167 Other courts have interpreted causation under § 3604(c) in a similar manner. In Hunter, the Fourth Circuit stated that “in the context of classified real estate advertising, landlords and brokers ‘cause’ advertisements to be printed or published.”168 Craigslist played no such role in the creation of the discriminatory advertisements posted on its website. As the Craigslist court correctly pointed out, “nothing in the service craigslist offers induces anyone to. . .express a preference for discrimination.”169 Thus, although the Communications Decency Act is silent regarding liability for causing something to be made, printed, or published,
164 Id. at 1457. 165 Id. at 278. 166 Chicago Lawyers’ Comm. for Civil Rights Under Law, Inc., v. Craigslist, Inc., 519 F.3d 666, 671-72 (7th Cir. 2008). 167 Id. at 671 168 United States v. Hunter, 459 F.2d 205, 210 (4th Cir. 1972). 169 Craigslist, 519 F.3d at 671.
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Craigslist was correctly found not liable under this part of § 3604(c) of the Fair Housing Act. Finally, § 3604(c) of the Fair Housing Act makes it illegal to make any discriminatory notice, statement, or advertisement, with respect to the sale or rental of housing. In 1968, the common definition of the word make was “to cause to exist. . .[t]o form, fashion, or produce”170 Under the court’s interpretation of the Communications Decency Act, an interactive computer service provider is immune from being treated as a speaker for the purposes of civil liability. The ordinary meaning of the verb to speak is “to communicate. . .by talking”171 Thus, an interactive computer service provider cannot be held liable under § 3604(c) of the Fair Housing Act for making any orally communicated statements. However, this immunity does not preclude an interactive computer service provider, such as Craigslist, from being found liable under § 3604(c) for making a discriminatory non- verbal advertisement or notice. The following section argues that Craigslist made the discriminatory housing advertisements complained about in Craigslist. Thus, the court should have held that Craigslist was liable under § 3604(c) of the Fair Housing Act.
2. Liability for Making Discriminatory Advertisements
The Fair Housing Act provides that it is a violation of the act to “make. . .any notice, statement, or advertisement. . .that indicates any preference, limitation, or discrimination” in the sale or lease of housing.172 The common definition of the word make is “to cause to exist. . .[t]o form, fashion, or produce.”173 This section demonstrates that the allegedly discriminatory advertisements at issue in Craigslist were computer files that were made exclusively by Craigslist. Thus, the court should have held Craigslist liable under the Fair Housing
170 BLACK’S LAW DICTIONARY 1107 (Revised 4th ed. 1968). 171 WEBSTER’S NEW WORLD DICTIONARY 566 (1990). 172 Fair Housing Act, 42 U.S.C. § 3604(c) (2000). 173 BLACK’S LAW DICTIONARY 1107 (Revised 4th ed. 1968).
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Act’s prohibition against making discriminatory housing advertisements. The process of a Craigslist posting begins by a user accessing a form on Craigslist’s website (“File 1”) designed to accept from the user, among other things, a description of the housing the user seeks to sell or rent, the asking price, and the location. Upon submitting the information, the content that the user provided is sent to a web server. When the information is at the web server, it is analyzed and reformatted by a computer program. Subsequently, a new file (“File 2”) is created that contains the users input along with Craigslist’s signature look, feel, and added features. File 2 is then placed on Craigslist’s website to be viewed by the website’s future visitors. Additionally, a hyperlink is created on another webpage that is used as a reference to access and view that file.174 The discriminatory advertisements at issue in Craigslist were not the File 1 type. Although each visitor provided in File 1 the inspiration for the contents of File 2, it cannot be said that any Craigslist user made the resulting file. The following two scenarios illustrate this point. Consider the process of a person purchasing a housing advertisement in the local newspaper. The person drives to the newspapers office, fills out a form with information to assist the newspaper in creating the advertisement, and hands the piece of paper to an employee of the newspaper. The employee then takes the customer’s input and creates an advertisement fit for publication. The next day, the paper is distributed to its subscribers, complete with the advertisement purchased by the customer. Contrast this situation with a person who attempts to sell their home by posting a notice on a public bulletin board. The person simply writes the pertinent information on a piece of paper and places the paper on the board. No other actors are required to create the advertisement because the piece of paper is the end product.
174 For an overview of HTML programming and website design, see generally Todd Stauffer, Absolute Beginner's Guide to Creating Web Pages (Que Publishing 2003).
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In the first scenario, it cannot be said that the advertisement was made by anyone but the newspaper company. Although the person provided input by filling out the form, that form is a completely distinct object from the resulting advertisement. The customer had no role in purchasing the materials, formatting the information, instructing the printer, or any other activity associated with creating the newspaper. Simply put, but for the newspaper’s efforts, the form would simply be a form, not an advertisement in the newspaper. Thus, if the advertisement contained a discriminatory message, it would be proper to hold the newspaper company liable under the Fair Housing Act’s prohibition against making discriminatory advertisements. Conversely, the advertisement placed on the bulletin board was created by the person who placed it there. The bulletin board had no capacity to reformat or otherwise alter the piece of paper; the advertisement was solely the product of the person’s own efforts. Thus, if the piece of paper contained a discriminatory message, the person who posted it would be liable under the Fair Housing Act’s prohibition against making discriminatory advertisements. Craigslist is analogous to the newspaper company. Like the newspaper company, Craigslist offered a place for user input, processed the input, and, unlike the bulletin board, created a new product. Furthermore, the new product in both of these situations would not have been created, but for the efforts of the respective services. Analogous to the newspaper office being closed, if the server containing Craigslist’s formatting program was down, the resulting advertisement could not have been made. The Fair Housing Act makes it illegal to “make. . .any notice, statement, or advertisement” that contains a discriminatory message. Each of these words should be presumed to not be redundant. In Craigslist, it is clear that by inputting a discriminatory message into the website form, the user made a discriminatory statement. However, as demonstrated above, this form was not the advertisement. The advertisement, albeit containing the statement provided by the user, was made by the computer program on Craigslist’s servers that was programmed to create a Craigslist advertisement with Craigslist’s signature look, feel, and added features.
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Furthermore, it is pertinent to note the distinction between Craigslist’s role as a publisher and as a maker of the allegedly discriminatory advertisements at issue in Craigslist. As noted above, Craigslist made175 the advertisements when Craigslist’s computer program took the users input and created File 2. However, Craigslist did not publish176 File 2 until it placed it on its web space to be viewed by the public. This distinction is crucial because although the court’s interpretation of the Communications Decency Act provides civil immunity for interactive computer service providers from being treated as a publisher or speaker, the Act provides no such immunity for those who make a discriminatory advertisement.177 Therefore, the Craigslist court erred by not holding Craigslist liable under the Fair Housing Act’s Ban on making discriminatory advertisements.
IV. THE CRAIGSLIST COURT WAS INCORRECT TO IMPLY THAT PUBLIC POLICY DICTATES THAT INTERACTIVE COMPUTER SERVICE PROVIDERS SHOULD BE AFFORDED IMMUNITY.
In Craigslist, Chief Judge Easterbrook spent a substantial portion of the opinion providing dictum on the public policy reasons for
175 When the Fair Housing Act was passed, the word make meant “[T]o cause to exist. . .[t]o form, fashion, or produce.” BLACK’S LAW DICTIONARY 1107 (Revised 4th ed. 1968). 176 When the Fair Housing Act was passed, the word publish meant “[t]o make public; to circulate; to make known to the people in general.” BLACK’S LAW DICTIONARY 1297 (Revised 4th ed. 1968).. 177 In Tyus v. Robin Constr. Corp., the United States District Court for the Northern District of Illinois rejected an agency's argument that it could not be held liable under § 3604(c) because it did not publish the advertisements in question. 1993 U.S. Dist. LEXIS 2791, *9-*10 (N.D. Ill. Mar. 4, 1993). The court held that although the advertising agency was not the publisher of the advertisements, it was still liable because creating the advertisements fell “within the ambit of the statute.” Id. at *9. The court explained that § 3604(c) “does not limit liability only to those who publish an advertisement. That provision also expressly imposes liability on those who ‘make. . .any advertisement. . .that indicates any preference. . .based on race, [or] color.’" Id.
187 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 absolving Craigslist of liability as a publisher or speaker.178 This section argues that interactive computer service providers require no such special treatment. The Craigslist court began its policy analysis by implying that § 3604(c) of the Fair Housing Act may violate the Free Speech Clause179 of the First Amendment regardless of the publishing medium.180 The court noted that single-family homes sold or rented by an owner who does not own more than three single-family homes are exempted from the Fair Housing Acts ban on discriminating in the sale or purchase of a home.181 However, § 3604(c)’s ban on discriminatory advertising still applies in these situations. The court found this problematic; it stated that “any rule that forbids truthful advertising of a transaction that would be substantively lawful encounters serious problems under the first amendment.”182 However, despite the Craigslist court’s warning, courts have consistently held that although these types of landlords “are legally permitted to discriminate in the sale or rental of housing [they still] may not advertise their intention to do so.”183 Moreover, it is well settled law that there is no disruption of the traditional role of the free press by the prohibition of the publication of discriminatory advertisements.184 Thus, the Fair Housing Act’s prohibition against discriminatory advertisement is likely not problematic under the First Amendment. The Craigslist court further argued that the screening of user- generated content would be prohibitively difficult for interactive computer service providers.185 The court posited that a simple filter
178 Chicago Lawyers’ Comm. for Civil Rights Under Law, Inc., v. Craigslist, Inc., 519 F.3d 666, 668-69 (7th Cir. 2008). 179 The First Amendment provides in pertinent part that “Congress shall make no law. . .abridging the freedom of speech, or of the press.” U.S. CONST. amend.. I. 180 Craigslist, 519 F.3d at 668. 181 Fair Housing Act, 42 U.S.C. § 3603(b)(1) (2000). 182 Craigslist, 519 F.3d at 668. 183 United States v. Hunter, 459 F.2d 205, 213 (4th Cir. 1972). 184 Id. at 212-13. 185 Craigslist, 519 F.3d at 668-669.
188 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 that blocks words such as “white” would not work because the filter would block neutral sentences such as: “‘red brick house with white trim.’”186 The court also posited that human filterers may be equally poor at determining whether or not some advertisements are discriminatory.187 One of the advertisements complained about in Craigslist read, “’Catholic Church and beautiful Buddhist Temple within one block.”188 The court held that one could interpret this in a discriminatory as well as a harmless manner.189 Although screening advertisements for discriminatory messages requires significant effort, requiring interactive computer service providers to do so is not unreasonable. In fact, the Fourth Circuit has gone so far to say that a publisher can “easily distinguish between permissible and impermissible advertisements in discharging its duty to reject those that violate § 3604(c).”190 Furthermore, courts have required virtually every other conceivable medium of expression to engage in screening for § 3604(c) violations.191 Interactive computer service providers should not be allowed a free pass simply because they generally receive higher volumes of advertisement submissions. The drafter’s of the Fair Housing Act made it clear that they intended to “alter the whole character of the housing market.”192 Thus, Congress certainly did not intend to bend the requirements of the Fair Housing Act whenever a company received too many requests for advertisements. Finally, the court argued that the high volume of submissions would require Craigslist to hire more staff and pass the added expense on to the consumer.193 The court is certainly correct that screening is expensive. However, this is a cost that newspapers and every other
186 Id. at 668. 187 Id. at 669. 188 Id. at 669. 189 Id. 190 United States v. Hunter, 459 F.2d 205, 210-11 (4th Cir. 1972). 191 Id. at 210-211. 192 Mayers v. Ridley, 465 F.2d 630, 652 (D.C. Cir. 1972). 193 Craigslist, 519 F.3d at 668-669.
189 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 publishing medium have bared since the Fair Housing Act was passed. For a newspaper to increase its volume, it must increase its staff. By exempting interactive computer service providers for § 3604(c)’s ban on discriminatory advertising, interactive computer service providers have been given a distinct and unjustified competitive advantage over their competitors that use other publishing mediums. Although there is often reason to regulate market-based competition to protect a needy segment of the population, interactive computer service providers offering internet-based housing advertisements are not such entities. In the past decade, websites such as Craigslist have become a dominant force in the housing classified market. In 2000, online classified advertisement revenue totaled just over $500,000 million.194 By 2006, that figure shot up to an astonishing $3.1 billion. No small player in the market, Craigslist is estimated to top $80 million in revenue in 2008 and would “easily” be able to make over $200 million per year with minor changes to its pricing structure.195 Furthermore, any advantage awarded to interactive computer service providers further handicaps the greatly imperiled newspaper industry.196 Typically, a newspaper derives eighty percent of its revenue from advertising.197 Since online classified advertisements have entered the market, stock prices of newspapers have tumbled and many papers have been forced to go out of business.198
194 See, Diaz, supra note 26. 195 Elinor Mills, Report estimates Craigslist 2008 revenue at $80 million (April 3, 2008) , http://news.cnet.com/8301-10784_3-9911097-7.html. 196 HELEN THOMAS, WATCHDOGS OF DEMOCRACY? THE WANING WASHINGTON PRESS CORPS AND HOW IT HAS FAILED THE PUBLIC 113 (Scribner 2006) (noting that even industry moguls such as Warren Buffett, whose company owns an 18 percent interest in the Washington Post Company, predicted that the economic health of newspapers is deteriorating). 197 Richard Pérez-Peña, Shrinking Ad Revenue Realigns U.S. Newspaper Industry INTERNATIONAL HERALD TRIBUNE, Feb. 7, 2008, available at http://www.iht.com/articles/2008/02/07/business/paper.php. 198 Sarah Rabil, Newspapers Axe Monday Issues on Paper Cost, Ad Slump BLOOMBERG Oct. 13, 2008,
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Whether print media should be saved or should be left to die by the invisible hand of the market is beyond the scope of this Note. It is sufficient to point out, as detailed above in this section, that the court proffered no substantial justification for providing interactive service providers with special privileges not enjoyed by any other mediums of expression. Thus, absent a compelling justification not identified in Craigslist, public policy dictates that interactive computer service providers should be held to the same standard under the Fair Housing Act’s ban on discriminatory advertisements as every other medium.
CONCLUSION
In 1968, the country was forever changed when Congress passed the Fair Housing Act. At that moment in time, Congress demonstrated to the entire nation that it was committed to a future wherein all citizens would be able to experience discrimination free housing opportunities. Acknowledging the harmful psychological effects of public displays of discrimination, Congress included in the Fair Housing Act a strong and thorough ban on the dissemination of any type of discriminatory message in the sale of lease of real property. This ban remained complete until it was fragmented by courts interpreting the Communications Decency Act to provide interactive computer service providers with civil immunity from being treated as a publisher or speaker of third-party content. In Craigslist, the Seventh Circuit was presented with an opportunity to correct the prevailing misinterpretation of the Communications Decency Act, but balked at the invitation. As this Note demonstrates, the textual construction and the legislative history of the Communications Decency Act both favor an interpretation of § 230(c)(1) that an interactive computer service provider should be afforded immunity as a publisher or speaker of third-party content only when it fulfills its duty to screen its service for inappropriate and illegal content. Furthermore, notwithstanding the immunity offered by
http://www.bloomberg.com/apps/news?pid=20601109&sid=av5s4KX3injQ&refer= home
191 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 the Communications Decency Act, Craigslist should have been found liable under the Fair Housing Act’s ban on making discriminatory advertisements. Although Congress never contemplated the effect of the Communications Decency Act on the Fair Housing Act, the continuing debate over the proper interpretation of the Communications Decency Act has put the onus on Congress to take a side. Consistent with the arguments of this Note, Congress should amend the Communications Decency Act to explicitly state that an interactive computer service provider cannot be held civilly liable under § 3604(c) of the Fair Housing Act for printing, publishing, or making a discriminatory notice, advertisement or statement only when it engages in the good faith screening of third-party content posted on its services.
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POLICING THOUGHT: UNITED STATES V. KHATTAB AND THE MENS REA REQUIREMENT OF 21 U.S.C. § 841
∗ ANNE M. WALKER
Cite as: Anne M. Walker, Policing Thought: United States v. Khattab and the Mens Rea Requirement of 21 U.S.C. § 841, 4 SEVENTH CIRCUIT REV. 193 (2008), at http://www.kentlaw.edu/7cr/v4-1/walker.pdf.
INTRODUCTION
Actus non facit reum nisi mens sit rea, that “an act does not make one guilty unless the mind is guilty,” is an important principle of American criminal jurisprudence.1 Crimes are said to consist of two parts: a physical act or omission called the actus reus and a mental component called the mens rea.2 The mens rea, however, need not always be entirely about the defendant’s guilty mind.3 Certain mens rea may require that the prosecution show objective fault based on the mindset of an objective reasonable person rather than subjective fault based solely on the defendant’s bad mind.4 Either way, proving mens
∗ J.D. candidate, May 2009, Chicago-Kent College of Law, Illinois Institute of Technology; A.B. 2002, The University of Chicago. 1 Rollin M. Perkins, A Rationale of Mens Rea, 52 HARV. L. REV. 905, 905 (1939). 2 U.S. v. Apfelbaum, 445 U.S. 115, 131 (1980). Mens rea means “guilty mind” and is sometimes also called scienter or criminal intent. WAYNE R. LAFAVE, CRIMINAL LAW § 5.1 (4th ed. 2003). 3 LAFAVE, supra note 2. 4 Id. § 5.1(a). There are also a small number of crimes, strict liability crimes, that impose liability without fault or mens rea. Id. § 5.1 n.1.
193 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 rea demands some discussion of the defendant’s thoughts in committing the crime.5 Often, mens rea is overlooked in criminal law and deemed unimportant compared to the act itself.6 However, for both state and federal modern statutory crimes, a legislature has the power to place it in a position of utmost importance.7 In United States v. Khattab,8 the defendant was convicted of one such crime—attempting to possess pseudoephedrine under 28 U.S.C. § 841(c)(2) (the “Statute”).9 The Statute makes it illegal for a defendant to knowingly or intentionally possess or distribute a listed chemical “knowing or having reasonable cause to believe” that the chemical will be used to manufacture illegal drugs.10 Many of the listed chemicals would otherwise be legal to sell or possess or would carry lesser penalties for their black market sale; without the knowledge or reasonable belief that the chemical will be used to manufacture illegal drugs. Indeed, the sale or possession of the chemicals may not be at all illegal or even immoral.11 Thus, the mens
5 See id. § 5.1(a). 6 See Perkins, supra note 1, at 905 (noting facetiously that perhaps the Latin phrase should be shortened to actus facit reum, an act makes one guilty). 7 See LAFAVE, supra note 2, § 5.1(a). Where the legislature does not consider mens rea important for a crime and fails to include a mens rea in its language, one is inferred. See Staples v. U.S., 511 U.S. 600, 605 (1994). 8 536 F.3d 765 (7th Cir. 2008). 9 Id. at 766. 10 Comprehensive Drug Abuse Prevention and Control Act of 1970 § 401(c), 28 U.S.C. § 841(c)(2) (emphasis added). For precise text, see infra note 31. Listed chemicals include precursor chemicals to methamphetamine such as ephedrine, pseudoephedrine, iodine, red phosphorous, ethers such as toluene and ethyl ether, and hydrochloric acid. 21 C.F.R. § 1310.02 (2008). 11 For example, red phosphorous is a component of the strike pads of matches. CHARLES SALOCKS & KARLYN BLACK KALEY, CAL. EPA OFFICE OF ENVTL. HEALTH HAZARD ASSESSMENT, TECHNICAL SUPPORT DOCUMENT: TOXICOLOGY CLANDESTINE DRUG LABS/ METHAMPHETAMINE, RED PHOSPHOROUS 2 (2003). While matchbooks may be legally sold or even given away, under 21 C.F.R. § 1310.02 and 28 U.S.C. § 841(c)(2), it would be illegal to sell matchbooks to anyone with the knowledge that they would be used to manufacture methamphetamine.
194 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 rea component of the Statute is unusually important, and conviction under the Statute will depend heavily on proving that mens rea.12 In Khattab, the Seventh Circuit identified a split among the circuits as to the interpretation of the mens rea required for prosecution under the Statute.13 The Tenth Circuit found that “knowing or having reasonable cause to believe” requires that the government show a defendant had subjective, actual knowledge that the listed chemical would be used to manufacture methamphetamine.14 On the other hand, the Eighth, Ninth, and Eleventh Circuits all found that an objective, reasonable cause to believe was sufficient for conviction.15 The Seventh Circuit declined to take a side in the split, affirming Khattab’s conviction on other grounds and leaving the question entirely open in the Seventh Circuit.16 Part I of this comment discusses the importance of the Statute in the context of the methamphetamine problem in the United States and pseudoephedrine’s role in the manufacture of methamphetamine. It also briefly reviews the mens rea requirement. Part II examines the background of the Statute’s mens rea requirement as applied in the other circuits. Part III details the facts and arguments in United States v. Khattab.17 Finally, Part IV recommends that in the future, the Seventh Circuit, and the Supreme Court if applicable, join the Tenth Circuit and apply the “knowingly” mens rea narrowly, finding defendants guilty only where the government can prove that the defendant actually knew, not should have known, that the chemical would be used to manufacture an illegal narcotic. This conclusion will discuss the circuit split not only in the context of pseudoephedrine sales and possession but also within a more general question about
12 28 U.S.C. § 841(c)(2). 13 536 F.3d 765, 769 (7th Cir. 2008). 14 See U.S. v. Truong, 425 F.3d 1282, 1289 (10th Cir. 2005); U.S. v. Saffo, 227 F.3d 1260, 1268-69 (10th Cir. 2000). 15 See U.S. v. Galvan, 407 F.3d 954, 957 (8th Cir. 2005); U.S. v. Kaur, 382 F.3d 1155, 1157-58 (9th Cir. 2004); U.S. v. Prather, 205 F.3d 1265, 1267 (11th Cir. 2000). 16 Khattab, 546 F.3d at 769. 17 Id.
195 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 mens rea and whether the sale of otherwise legal materials should, as a matter of policy, be illegal where a dealer simply should know that the materials will be used to manufacture an illegal substance.
I. BACKGROUND
A. Pseudoephedrine and Methamphetamine Manufacture
The unusual importance of mens rea in the Statute has arisen out of a unique societal problem. In the last ten years, methamphetamine use and manufacture have dramatically changed rural America.18 Methamphetamine is an extraordinarily powerful—as well as addictive and dangerous—illegal stimulant.19 Methamphetamine users snort powdered methamphetamine, smoke a mixture of the powder, or inject the drug intravenously.20 Apart from the quick and powerful high methamphetamine users experience, the drug can also cause irritability, nervousness, insomnia, nausea, depression, and brain damage.21 However, unlike other powerful illegal drugs such as cocaine and heroin, which generally are imported, anyone who can read a recipe off the Internet can manufacture methamphetamine in their own home using several legally available ingredients, including the common decongestant pseudoephedrine.22 The manufacturing
18 In rural areas, where methamphetamine laboratories are easily concealed and thus prevalent, production and use have proliferated, resulting in a spike in accompanying crimes like theft and child abuse. Timothy Egan, Meth Building Its Hell’s Kitchen in Rural America, N.Y. TIMES, Feb. 6, 2002, at A14. Additionally, methamphetamine manufacture produces extremely toxic byproducts, putting rural environments at risk. Jennifer Wieman, Meth Labs: “Cooking” Up Environmental Disaster, 15 MO. ENVTL. L. & POL’Y REV. 127, 128 (2007). 19 U.S. Drug Enforcement Admin., Methamphetamine, http://www.usdoj.gov/dea/concern/meth.html (last visited Nov. 11, 2008). 20 U.S. Drug Enforcement Admin., Methamphetamine Facts, http://www.usdoj.gov/dea/pubs/pressrel/methfact01.html (last visited Nov. 11, 2008). 21 Id. 22 Simple Ways to Make Methamphetamine, www.simple-ways-to-make- methamphetamine.com (last visited Oct. 13, 2008).
196 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 process for methamphetamine is also extraordinarily dangerous, resulting in powerful fumes, toxic waste, and occasional explosions.23 Because methamphetamine labs are both mobile and easy to construct, state and federal authorities have determined that restricting the sale of the legal ingredients used to make methamphetamine, including pseudoephedrine, is the most effective means of curbing methamphetamine production and use.24 Beginning with the Comprehensive Methamphetamine Control Act of 1996,25 the federal government instituted additional regulations to control sale of methamphetamine’s ingredients.26 In its legal use, pseudoephedrine is an over-the-counter drug that relieves respiratory congestion.27 It was once available at retail in bottles containing loose pills, but now the drug is available only in “blister packs.”28 Packets of pseudoephedrine must be stored “behind-the-counter.”29 Federal law now criminalizes
23 U.S. Drug Enforcement Admin., supra note 19. 24 See, 21 U.S.C. § 841, which criminalizes the sale of precursor chemicals, listed in 21 C.F.R. § 1310.02. 25 Comprehensive Methamphetamine Control Act of 1996, Pub. L. No. 104- 237, 110 Stat. 3099 (1996). 26 U.S. Drug Enforcement Admin., supra note 19. 27 U.S. Food & Drug Admin., Legal Requirements for the Sale and Purchase of Drug Products Containing Pseudoephedrine, Ephedrine, and Phenylpropanolamine, http://www.fda.gov/cder/news/methamphetamine.htm (last visited Nov. 13, 2008). 28 United States v. Khattab, 536 F.3d 765, 666 (7th Cir. 2008). A blister pack is “[a] package that consists of molded plastic or laminate that has indentations (viewed as ‘blisters’ when flipped) into which a dosage form, is placed. A covering, usually of laminated material, is then sealed to the molded part.” U.S. Food & Drug Admin., Package Type, in DATA STANDARDS MANUAL C-DRG-00907 (2006), available at http://www.fda.gov/cder/dsm/drg/Drg00907.htm. 29 Behind-the-counter means either behind the pharmacist’s counter in a place inaccessible to the public or in a locked case. U.S. Food & Drug Admin., supra note 27. As recently as a few years ago, a person could walk into a drugstore, pick up a box of pseudoephedrine, commonly known as Sudafed, from the shelves, and purchase it at the cash register—no questions asked. Now, at least 37 states require the congested to wait in line at the pharmacy counter, show identification, and sign a logbook to purchase decongestants, and only in limited quantities. Id.; Terry Everett, Reversing Rural America’s Methamphetamine Epidemic, U.S. FED. NEWS, Jan. 30, 2006, available at 2006 WLNR 21183912. Tennessee has reported that such
197 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 possession or distribution of pseudoephedrine or several other precursor chemicals30 with the knowledge or reasonable cause to believe that it would be used to manufacture methamphetamine.31 At wholesale, pseudoephedrine is still sold in cases of bottles of loose pills, 144 bottles of 60 pills or 8,640 pills per case.32 Wholesalers need a license from the Drug Enforcement Agency (DEA) to import, export, or distribute cases in this format.33 A significant black market has therefore arisen to sell bulk quantities of pseudoephedrine to methamphetamine producers.34 Many recipes for methamphetamine call for the 60-milligram pseudoephedrine tablets.35 Loose pills are generally preferred over the blister packs, because they are easier to process.36 Because there are 8,640 pills in a case of bottles of loose methamphetamine pills, methamphetamine
regulations alone reduced the number of small methamphetamine lab seizures from more than 1,500 in 2004 to 955 in 2005. U.S. Drug. Enforcement Admin., supra note 19, n. 24. 30 See.21 C.F.R. § 1310.02. Pseudoephedrine regulations were strengthened by the Combat Methamphetamine Act of 2005, Pub. L. No. 109-177, 120 Stat. 192, 256-77 (2006). 31 21 U.S.C. § 841(c)(2) says in relevant part, Any person who knowingly or intentionally- … (2) possesses or distributes a listed chemical knowing, or having reasonable cause to believe, that the listed chemical will be used to manufacture a controlled substance except as authorized by this subchapter;… shall be fined in accordance with Title 18 or imprisoned not more than 20 years… 32 U.S. v. Khattab, 536 F.3d 765, 766 (7th Cir. 2008). 33 Id. 34 See Id. at 766. 35 Id. 36 Id.
198 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 manufacturers use the number 8,640 as a code to indicate bulk quantities.37 There are no recorded uses of bulk quantities of pseudoephedrine sold outside of DEA licensing restrictions.38 The DEA is unaware of any black market use for bulk quantities of pseudoephedrine other than for manufacture of methamphetamine.39 Thus, because of the nationwide problem with methamphetamine use, sales of pseudoephedrine and other precursor chemicals to methamphetamine have been criminalized and resulted in a black market.40 However, black market sellers can only be prosecuted under the Statute if they possess the requisite mens rea by knowing or having reasonable cause to believe that the chemicals they possess or distribute will be used to make an illegal drug.41
B. Mens Rea
In the American legal system, crimes are said to consist of two parts: the physical act (or omission) and a mental component called the mens rea.42 The justification for the existence of mens rea may be based on an idea that one should only be punished for intentional, not accidental acts.43 Alternatively, others justify the mens rea requirement on utilitarian grounds, arguing that only intentional crimes can be deterred.44
37 Id. at 766-67. 38 Id. at 767. 39 Id. 40 Id. at 766. 41 21 U.S.C. § 841(c)(2). 42 LAFAVE, supra note 2, at §5.1. 43 This argument is instinctual, the Supreme Court noted, as an extension of “the child’s familiar exculpatory ‘But I didn’t mean to[.]’” U.S. v. Morisette, 342 U.S. 246, 250-51 (1952). 44 See JOSHUA DRESSLER, UNDERSTANDING CRIMINAL LAW § 10.03[A] (3d ed. 2001). Dressler also identifies an argument that there is some value in prosecuting certain accidental crimes as a warning to others to be more careful. Id.
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Legal scholars have often criticized the term as “ambiguous” and having different meanings in different situations.45 Sometimes the meaning is broad and encompasses the defendant’s culpability or fault, while other times it refers to a defendant’s particular mental state required for prosecution of a crime.46 Further, the mens rea can be subjective and based on the thoughts and motives of the defendant himself.47 Alternatively, the mens rea may create an objective fault standard based on the mindset of a reasonable person in the defendant’s situation.48 Narrow, subjective fault is the usual requirement, while objective fault is sufficient for crimes where a stricter standard of criminal liability is appropriate.49 For statutory crimes, the language typically includes carefully chosen words to express the mens rea requirement, like intentionally, purposely, willingly, fraudulently, recklessly, or negligently.50 Naturally, there is significant case law discussing the applications of these words to real world fact scenarios,51 and the Model Penal Code has attempted to codify the common law definitions of the words.52
45 Id. at § 10.02[A] (quoting George Fletcher, Oliver Wendell Holmes, Francis Bowes Sayre, and Sanford H. Kadish). 46 Id. at § 10.02[B]-[C]. 47 LAFAVE, supra note 2, at § 5.1. 48 Id. 49 The mens rea for such crimes is typically negligence or carelessness, and the crimes themselves are often lesser offenses of crimes involving true intent, i.e. negligent homicide as opposed to intentional homicide. Thus, it is appropriate in such instances to hold the defendant to a higher standard of blameworthiness because the offenses charged are less than those requiring a more subjective intent. Id. at §5.1(a). 50 Id. 51 See Bryan v. U.S., 524 U.S. 184 (1998). 52 MODEL PENAL CODE § 2.02(2)(b) (2001). Relevantly, the word knowingly is defined as “A person acts knowingly with respect to a material element of an offense when: (i) if the element involves the nature of his conduct or the attendant circumstances, he is aware that his conduct is of that nature or that such circumstances exist; and (ii) if the element involves a result of his conduct, he is aware that it is practically certain that his conduct will cause such a result.” Id.
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It is an oft-repeated presumption in criminal law that when one commits an act, they intend for the “natural and probable consequences” to unfold.53 However, where the statutory mens rea requirement is purposely or knowingly, it is not enough to presume that the defendant intended the ordinary consequences of his or her actions.54 In fact, as the Supreme Court noted in Sandstrom v. Montana, in a criminal trial the prosecution always has the burden of proving beyond a reasonable doubt that the accused had the requisite mens rea.55 Thus, for a knowingly mens rea, the prosecution is charged with proving the defendant’s subjective fault—his personally guilty mind.56 In at least some circuits, “knowingly” does not necessarily require that the defendant knew with absolute certainty what would happen; he merely need be aware that there was a high probability that the illegal result would occur.57 Thus, a defendant may not willfully turn a blind eye to the situation around him and then say he did not know what was happening.58 When a defendant “shuts his eyes,” he then
53 See Ford v. Maryland, 625 A.2d 984, 994 (Md. 1993) (quoting Davis v. Maryland, 102 A.2d 816, 819-209 (Md. 1954)). 54 Sandstrom v. Montana, 442 U.S. 510, 524 (1979) (holding that the trial court incorrectly instructed the jury that a person is held to intend the reasonable consequences of his actions and overturning their conviction of defendant). 55 Id. 56 Id. 57 United States v. Jewell, 532 F.2d 697, 700 (9th Cir. 1976), cert. denied 426 U.S. 951 (1976) (holding that a man who was paid $100 to drive a stranger’s car from Tijuana to an address in the United States did not examine the situation around him if he did not know the car was full of marijuana). 58 See, e.g. United States v. Flores, 454 F.3d 149, 155 (3d Cir. 2006) (finding that defendant knew he was involved in money laundering because he used false social security numbers, opened bank accounts with large quantities of money, and received notice from the bank about structured transactions); United States v. Stewart, 185 F.3d 112, 126 (3d Cir.1999). See also United States v. Antzoulatous, 962 F. 2d 720, 724-25 (1992) (holding that the defendant who sold cars in cash to a group of men and left the cars under title of the dealership knew that those men were drug dealers purchasing the cars to hide the proceeds of their drug dealing).
201 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 acts at his own peril and is treated as though he has knowledge.59 A determination of a “knowing” mens rea based on a willful blindness standard must nonetheless be subjective in nature; the finder of fact should look to the defendant’s state of mind to determine whether he knew and was simply closing his eyes to the circumstances.60 For a mens rea like having reasonable cause to believe, on the other hand, whether the fault is objective or subjective is significantly less clear.61
II. PREVIOUS CASE LAW WITH RESPECT TO 21 U.S.C. § 841(C)(2)
As with other elements of a crime, the government has the burden of proving that the defendant had or should have had the requisite mens rea for the Statute.62 The government must therefore show that the defendant knew or should have known that the chemical the defendant possessed or distributed would be used to make an illegal narcotic.63 Despite the fact that there are no other known uses for bulk quantities of pseudoephedrine, no presumption exists that simply because the defendant was selling bulk quantities of pseudoephedrine, he or she knew that it would be used to produce methamphetamine.64 The government must show additional facts to reach that conclusion, and the circuits have split as to exactly what the government must show.65 The Eleventh Circuit was one of the first to examine the issue in 2000, United States v. Prather, where the defendant operated a mail- order company that sold miscellaneous items wholesale, including
59 Rollin M. Perkins, A Rationale of Mens Rea, 52 HARV. L. REV. 905, 920 (1939). 60 United States v. Wasserson, 418 F.3d 225, 237 (2005) (holding that a jury instruction must be clear on the subjectivity of the standard). 61 See supra Section II. 62 Sandstrom, 442 U.S. at 524. 63 21 U.S.C. § 841(c)(2). 64 United States v. Khattab, 536 F.3d 765, 769 (7th Cir. 2008). 65 Id.
202 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 pseudoephedrine in cases of 75 1,000 tablet bottles.66 His customers included both individuals and “head shops.”67 During 1994 and 1995, Prather learned that several of his customers were being investigated by authorities, and in 1995 he received an opinion letter from a law firm stating that his business activities put him at risk for prosecution.68 Additionally, he told one potential customer that an arrangement where he sent 100 cases per week of pseudoephedrine to his home address was not “a good idea” because the “cops would be hot on” them.69 He persisted with his business.70 Eventually, he was charged with and convicted of ten counts of violating the Statute by distributing pseudoephedrine and knowing or having reasonable cause to believe that it would be used to manufacture methamphetamine.71 The Eleventh Circuit upheld the conviction over Prather’s argument that the government had not proved that the pseudoephedrine had actually been used to manufacture methamphetamine, holding that the government has no such obligation.72 Further, the Eleventh Circuit affirmed the jury instructions regarding “reasonable cause to believe.” The jury instructions asked the jurors “[W]hat would a reasonable person reasonably have believed based on the evidence known to the defendant[?]” The jurors requested clarification. The judge responded, “Here the focus is not on what it is proven that he actually knew. Here the standard is[,] based on what he did know, would a reasonable
66 205 F.3d 1265, 1268 (11th Cir. 2000). 67 Id. A “head shop” is a shop specializing in articles of interest to drug users. Merriam-Webster Online, http://www.merriam- webster.com/dictionary/head%20shop (last visited Dec. 10, 2008). 68 Prather, 205 F.3d at 1268. 69 Id. 70 Id. 71 Id. Actually, Prather was charged and convicted under 21 U.S.C. § 841(d)(2), which was re-designated 21 U.S.C. § 841(c)(2) with the passage of the Hillory J. Farias And Samantha Reid Date-Rape Drug Prohibition Act Of 2000, Pub. L. 106-172 § 9, 114 Stat. 13 (2000). 72 Id. at 1269.
203 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 person . . . have cause to believe that the pseudoephedrine in the count would be diverted.”73 Because the defendant failed to object to the jury instructions at trial, the Eleventh Circuit reviewed the question based on a plain error standard, which requires only that the instruction was not a plainly incorrect statement of the law, and found that the jury instruction was not plainly erroneous.74 In 2004, the Ninth Circuit examined another conviction under the Statute in United States v. Kaur.75 Defendant Manjit Kaur was charged when a confidential DEA source purchased large quantities of pseudoephedrine from her at the convenience store she owned.76 The district court instructed the jury that “‘Reasonable cause to believe’ means to have knowledge of facts which, although not amounting to direct knowledge, would cause a reasonable person knowing the same facts to reasonably conclude that the pseudoephedrine would be used to manufacture a controlled substance.”77 Kaur argued on appeal that the jury instruction abused the discretion of the district court where it failed to equate knowledge with reasonable cause to believe and imposed a reasonable person standard rather than a subjective standard.78 The Ninth Circuit rejected the idea that reasonable cause to believe should be equated with actual knowledge, finding that such an interpretation would render the second term superfluous.79 Furthermore, the court held that the reasonable person standard was appropriate in that it incorporated “both subjective and objective considerations.”80
73 Id. at 1271. 74 Id. 75 382 F.3d 1155 (9th Cir. 2004). 76 Id. at 1156. 77 Id. 78 Id. at 1157. 79 Id. (citing Conn. Nat’l Bank v. Germain, 503 U.S. 249, 253 (1992) (“[C]ourts should disfavor interpretations of statutes that render language superfluous.”)). 80 Id.
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Similarly, in 2005, the Eight Circuit upheld a defendant’s conviction in United States v. Galvan.81 Galvan was caught by police officers conducting surveillance of a Wal-Mart after purchasing his maximum allotted three boxes of pseudoephedrine pills.82 The police officers then followed Galvan to six other stores, arrested him, and found many boxes of pseudoephedrine pills in his car.83 The Eighth Circuit held that the district court was correct in rejecting Galvan’s proposed jury instructions, which stated that “‘reasonable cause to believe’ . . . requires an inquiry into what this particular defendant had reason to believe” and is a standard “akin to actual knowledge.”84 The court quoted and agreed with Kaur that the instruction would render “reasonable cause to believe” extraneous next to actual knowledge.85 The Tenth Circuit, on the other hand, has held that “reasonable cause to believe” is mainly subjective and based on the knowledge of the defendant. In Unites States v. Saffo, defendant Randa Saffo was part of a large-scale operation selling pseudoephedrine wholesale to other wholesale distributors in different states.86 She was arrested, charged with, and convicted of seven counts of violating the Statute.87 In this case, the Tenth Circuit’s first examination of the Statute’s mens rea requirement, the court examined the requirement’s constitutionality.88 In this discussion, the court held that “the reasonable cause to believe” standard is “akin to actual knowledge.”89 If it were not, it would mean that mens rea was not “personal,” but instead based on societal ideals and mindsets.90 In other words, if “reasonable cause to believe” was not based on the defendant’s
81 407 F.3d 954, 957 (8th Cir. 2005). 82 Id. at 956. 83 Id. 84 Id. at 957. 85 Id. 86 227 F.3d 1260, 1264 (10th Cir. 2000). 87 Id. at 1267. 88 Id. 89 Id. at 1269 (citing State v. Smith, 123 A.2d 369, 372 (N.J. 1956)). 90 Id.
205 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 subjective knowledge, it would not be a mens rea requirement at all but instead a barometer of society’s knowledge.91 Such a result would be unconstitutional, so the Tenth Circuit interpreted the “reasonable cause to believe” standard as based on defendant’s subjective knowledge and held that the Statute was constitutional.92 In United States v. Truong, the defendant sold large quantities of pseudoephedrine to various people while working at a Texaco gas station.93 While the gas station stocked boxes of six sixty-milligram pseudoephedrine tablets, it also kept thousand-count bottles of 50 milligram tablets under the counter that sold for approximately $300 each.94 Truong willingly told police that he received the large bottles from a man who then accepted payment after Truong sold them.95 He also told police he did not know the purpose of the pills.96 One of Truong’s former purchasers-turned-government-witness testified in response to the prosecutor’s question, “And he was speaking English?” “He was trying to, yeah . . . ”97 These facts contributed to the idea that Truong may not have known the purpose of the pills.98 However, Truong also acted as if he knew his actions were illegal; he accepted cash only for the bottles, kept no records of the transactions, did not ring up the sales in the cash register, conducted the sales after hours, and hid the bottles in Styrofoam cups when he sold them.99 At the end of the government’s case, Truong moved for judgment of acquittal, arguing that the prosecution had failed to prove that he knew or had reasonable cause to believe that the pseudoephedrine would be
91 Id. 92 Id. While the examination was useful precedent, the point was rather moot. Because Saffo had actual knowledge that the pseudoephedrine she sold would be used to manufacture methamphetamine, the court sustained her conviction. Id. 93 425 F.3d 1282, 1284-85 (10th Cir. 2005). 94 Id. at 1285. 95 Id. 96 Id. 97 Id. at 1287. 98 Id. 99 Id. at 1285-86.
206 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 used to manufacture methamphetamine; the motion was denied, and the jury found Truong guilty.100 The Tenth Circuit noted on appeal that the Statute has an unusual mens rea requirement in that the government cannot simply prove that the defendant knew, intended, or had reasonable cause to believe that the chemical would be abused or used illegally; they must actually show that he knew or had reason to believe the substance would be used to manufacture methamphetamine.101 The court also noted that the Statute could be interpreted, as other circuits have,102 to contain both a subjective and objective mens rea requirement; a defendant could be convicted based on his actual knowledge or with a showing that a reasonable person under the circumstances would have known.103 However, the court retained its Saffo interpretation and held that the government had the burden of proving that Truong had actual knowledge or something close to it that the pseudoephedrine he sold would be used to manufacture methamphetamine.104 Because the government did not present evidence that Truong had received official government notice, as other defendants had in similar cases,105 that large quantities of pseudoephedrine are generally used to manufacture
100 Id. at 1287-88. 101 Id. at 1289 (emphasis added). 102 See United States v. Galvan, 407 F.3d 954, 957 (8th Cir. 2005); United States v. Kaur, 382 F.3d 1155, 1157-58 (9th Cir. 2004); United States v. Prather, 205 F.3d 1265, 1271 (11th Cir. 2000). 103 Truong, 425 F.3d at 1289. 104 Id. 105 Other cases contained evidence that defendants had received actual notice pills would be used to produce methamphetamine. See United States v. Nguyen, 413 F.3d 1170, 1175 (10th Cir. 2005) (DEA issued red notices to area stores warning that pseudoephedrine may be used to make methamphetamine and informed employees of the state and federal laws regarding pseudoephedrine sales.); United States v. Saffo, 227 F.3d 1260, 1265 (10th Cir. 2000) (Defendant received a DEA “red notice” with information about pseudoephedrine and the law); United States v. Buonocore, 416 F.3d 1124, 1126 (10th Cir. 2005) (A recording revealed the purchaser saying, “the meth cooks have been cookin [sic] like crazy . . . I must have had a run, there’s a bunch of meth cooks in town, that’s what their [sic] using them for.”).
207 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 methamphetamine, the court reversed Truong’s conviction as unsupported by sufficient evidence.106 Though the government presented more than sufficient evidence that Truong knew his customers “were up to no good”, they did not prove the “unusually specific mens rea requirement” of the Statute.107 Thus, the Tenth Circuit’s interpretation of the Statute disagrees directly with that of the Eighth, Ninth, and Eleventh Circuits about whether the “having reasonable cause to believe” mens rea is based on the defendant’s knowledge or what a reasonable person would think in the defendant’s position.108
III. United States v. Khattab
In 2005, Muhammad Khattab negotiated with Khalid Hassan, a confidential informant for the Drug Enforcement Agency, to purchase a large quantity of pseudoephedrine.109 Hassan recorded his conversations with Khattab both through a recording device on his telephone and by wearing a wire while meeting with Khattab in person.110 During this time, Hassan told Khattab he had a contact willing to sell him 100 boxes of pseudoephedrine.111 At a meeting April 22, 2005, between Khattab, Hassan, and another man at an auto parts store, Hassan wore a recording device monitored and recorded by DEA agents.112 During this conversation, at least one of the men present referenced extracting something from the pseudoephedrine to make a different substance.113 The men also
106 Truong, 425 F.3d at 1291. 107 Id. at 1290-91. 108 See United States v. Khattab, 536 F.3d 765, 769 (7th Cir. 2008). 109 Id. at 765-66. 110 Id. at 766. 111 Id. 112 Id. The conversation was conducted in Arabic. The government introduced transcripts verified as accurate translations into English by a linguist, Bassam Abbasi. Id. at 767. 113 Id. The Seventh Circuit is unclear as to whether it is known who made the various statements. Several possibly incriminating statements were made by Khattab
208 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 referred to the substance created from the extracted pseudoephedrine as “the narcotic substance.”114 When one of the men asked Khattab, “[d]o they sniff it or inject it?” Khattab answered, “No, they sniff it… They’ll mix it with the baking soda… [o]r with cocaine.”115 On May 31, 2005, Hassan and Khattab decided to meet with a DEA agent posing as a deliveryman for said pseudoephedrine supplier.116 After Khattab became spooked by the potential of law enforcement presence one day, the men rescheduled and met in an alley behind a gas station on the South Side of Chicago later that day.117 The undercover DEA agent showed Khattab 100 boxes of pseudoephedrine in the back of his van. Khattab then paid the agent $3,000 for the drugs.118 That amounted to double what the agent paid from a wholesale supplier.119 As Khattab began moving the drugs to his own van, DEA agents who had been conducting surveillance on the scene identified themselves.120 Khattab gave chase but was quickly apprehended.121 or in his presence on April 22: “they extract those substances”; “[d]o they extract the same amount from this substance, as from the other substance that they bring from . . . Canada?”; “they’ll mix it with the baking soda.”.Id. Only one statement, “[they] dissolve the medicine, and they extract the substance from it, and they mix it up,” was attributed by the Seventh Circuit to Khattab. Id. 114 Id. They said: “the narcotic substances”; “it’s a narcotic”; “half and half with the . . . narcotic, uh, substance.” Id. The transcript also contained a conversation indicating that Khattab knew the pseudoephedrine was more valuable in loose bottle form: “[Khattab:] The Canadian stuff . . . First, it comes loose and ready. [Hassan:] Yeah, this one you have to make it loose by yourself. [Khattab:] No, I can give it to them the way it is, but with a lesser price. It’s a cheaper price.” Id. The men also mention the number 8,640, and Khattab said “the most important thing” was to obtain 60-milligram pills. Id.; see also supra text accompanying notes 32-37. 115 Id. 116 Id. at 766. 117 Id. 118 Id. 119 Id. 120 Id. 121 Id.
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Khattab was thus indicted on one count of attempting to knowingly or intentionally possess or distribute pseudoephedrine with knowledge, or a reasonable cause to believe, that it would be used to manufacture a substance containing methamphetamine.122 Khattab waived his right to a jury and was tried in a bench trial in January 2007.123 At trial, after the government presented its case, Khattab moved for a judgment of acquittal, arguing that the government had failed to produce testimony linking Khattab to methamphetamine and thus failed to prove that he knew or should have known that the pseudoephedrine he purchased would be used to manufacture methamphetamine.124 The district court denied the motion, ruling that it had not fully reviewed the recordings and transcripts, and that as the finder of fact, it would do so and make a determination at the end of the trial.125 Khattab waived his right to testify. After closing arguments, the district court declared that the evidence was “just barely” sufficient to connect Khattab to production of methamphetamine.126 The court identified Khattab’s recorded statement, “They sniff it,” as the most damning piece of evidence, and further held that Khattab clearly knew his behavior to be illegal in some way, else he would not have insisted on secrecy in the meetings.127 Thus, Khattab was convicted.128 He was sentenced below sentencing guidelines to 144 months’ imprisonment.129 Khattab appealed his conviction on the basis that the government failed to prove that he met the second element of the crime in the statute.130 He conceded that he “knowingly or intentionally . . . possess[ed] . . . a listed chemical,” but denied that he did so “knowing,
122 This indictment came under 21 U.S.C. § 846 and 21 U.S.C. § 841(c)(2)(2). 123 Khattab, 536 F.3d at 766. 124 Id. at 767. 125 Id. at 767-68. 126 Id. at 768. 127 Id. 128 Id. 129 Id. 130 Id. at 4.
210 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 or having reasonable cause to believe that the listed chemical w[ould] be used to manufacture a controlled substance.”131 In fact, Khattab argued on appeal that the government had failed to prove the mens rea requirement that he knew the pseudoephedrine he had purchased would be used to make methamphetamine.132 The Seventh Circuit then identified the split between the courts as discussed above in Part II, but declined to “weigh in on the circuit split regarding the proper mens rea standard.”133 The court held that even viewing the evidence in the light most favorable to Khattab, he actually knew that the pseudoephedrine would be used to make methamphetamine.134 The court saw his understanding that the pseudoephedrine would be “extracted” and that “they sniff it,” as adequate proof of his knowledge. Thus, the Seventh Circuit affirmed the district court’s decision.135
IV. THE SEVENTH CIRCUIT AND SUPREME COURT SHOULD ADOPT THE POSITION OF THE TENTH CIRCUIT WITH RESPECT TO MENS REA REQUIRED BY 21 U.S.C. § 841.
The Tenth Circuit’s opinion in United States v. Saffo136 is the only interpretation of reasonable cause to believe that makes sense in light of the meaning and history of mens rea. The mens rea requirement may not always focus exclusively on the defendant’s guilty state of mind, and it may sometimes force the defendant to have examined the world around him,137 but it ought generally to be subjective, to remain personal. A mens rea requiring knowledge or reasonable cause to believe cannot sensibly incorporate aspects of some other reasonable person’s mind. To blend the two states of mind is to completely
131 Id; 21 U.S.C. § 841(c)(2)(2). 132 Khattab, 536 F.3d at 768. 133 Id. at 769. 134 Id. 135 Id. at 771. 136 227 F.3d 1260 (10th Cir. 2000). 137 See supra text accompanying notes 57-60.
211 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 eradicate the purpose of the mens rea requirement, which is generally to hold defendants responsible only for crimes they intended to commit.138 The other circuits’ holdings with respect to “reasonable cause to believe” consider only that knowledge is already a possible mens rea listed in the Statute and express concerns that interpreting “reasonable cause to believe” as akin to knowledge would be duplicative.139 On the contrary, it is not at all duplicative. The “reasonable cause to believe” standard merely allows the government, in cases where the defendant had clear notice that the chemical would be used to make methamphetamine, to convict where they do not have an affirmative statement by the defendant that he or she knew the chemical would be used to make methamphetamine.140 Thus, it allows the government to meet its burden of proof where knowledge is all but explicit. However, it does not allow the government to make inferences based on the knowledge of people in general about methamphetamine or based on evidence that the defendant knew something generally illegal was going on.141 Thus, the standard as interpreted by the Tenth Circuit is not duplicative as alleged by the other circuits.142 In general, it would be ludicrous to hold sellers responsible for the damage their otherwise innocent products may cause. A fertilizer retailer should not be convicted of murder because he sold the fertilizer that would later be used to make a bomb. A gas station attendant must not be held responsible for selling the gas an arsonist uses to burn a building. A pawnshop owner cannot be held responsible for legally selling a gun later used to kill someone. Likewise, it would be crazy to hold someone liable for selling the pseudoephedrine, iodine, red phosphorous, ether, hydrochloric acid, or methanol that
138 See Rollin M. Perkins, A Rationale of Mens Rea, 52 HARV. L. REV. 905, 905 (1939). This, of course, excepts strict liability and negligence crimes. See supra Section I.B. 139 See United States v. Kaur, 382 F.3d 1155, 1157 (9th Cir. 2004). 140 See United States v. Saffo, 227 F.3d 1260, 1269 (10th Cir. 2000). 141 See United States v. Truong, 425 F.3d 1282, 1291 (10th Cir. 2005). 142 Kaur, 382 F.3d at 1157.
212 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 someone later uses to manufacture methamphetamine when the seller had no way of knowing the destination of their product. Thus, the Statute includes a mens rea requirement “knowing or having reasonable cause to believe[,]” to ensure that innocent people are not prosecuted for the crimes of others.143 While it is clear that a seller who knows ought to be prosecuted and a seller who does not know should not be, there exists a grey area wherein the government may not be able to prove what exactly the defendant knew or thought.144 In such a circumstance, it is unfair and contrary to the purpose of mens rea to hold a defendant liable for what he might have thought or what another man in his shoes might have thought. This is, of course, not true in the case of a defendant who willfully turns a blind eye to the circumstances around him.145 In fact, it would be possible to argue that at this juncture, anyone who sells bulk quantities of pseudoephedrine must either know the pseudoephedrine will eventually be used to make methamphetamine or has turned a blind eye to reality, especially where the DEA has gone out of their way to inform people.146 However, the government must nonetheless maintain the burden of proof; the government cannot convict people under the Statute without showing that they knew or had something reasonably akin to knowledge that the chemical they possess or distribute will be used to make methamphetamine.147 Especially with respect to the other precursor chemicals such as iodine
143 21 U.S.C. § 841(c)(2). 144 See United States v. Truong, 425 F.3d 1282, 1291 (10th Cir. 2005). 145 United States v. Antzoulatos, 962 F.2d 720, 725 (7th Cir. 1992). 146 See, e.g. United States v. Nguyen, 413 F.3d 1170, 1175 (10th Cir. 2005) (DEA issued red notices to area stores warning that pseudoephedrine may be used to make methamphetamine and informed employees of the state and federal laws regarding pseudoephedrine sales.); United States v. Saffo, 227 F.3d 1260, 1265 (10th Cir. 2000) (Defendant received a DEA “red notice” with information about pseudoephedrine and the law); United States v. Buonocore, 416 F.3d 1124, 1126 (10th Cir. 2005) (A recording revealed the purchaser saying, ”the meth cooks have been cookin [sic] like crazy . . . I must have had a run, there’s a bunch of meth cooks in town, that’s what their [sic] using them for.”). 147 See United States v. Saffo, 227 F.3d 1260, 1264 (10th Cir. 2000).
213 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 and red phosphorous that can be purchased legally for a variety of legal purposes, to apply a reasonable person standard would be grossly unfair and create an absurd result. Therefore, the mens rea requirement in the Statute should be applied narrowly to avoid requiring people, in the context of selling otherwise legal goods, to think precisely like the reasonable man.
CONCLUSION
Because the Tenth Circuit’s holding in United States v. Saffo that “reasonable cause to believe” is a standard akin to knowledge is the only just and fair way to interpret 21 U.S.C. § 841(c)(2), the Seventh Circuit and the United States Supreme Court should adopt that standard if the issue arises.
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UNRAVELING TINKER: THE SEVENTH CIRCUIT LEAVES STUDENT SPEECH HANGING BY A THREAD
∗ MARCIA E. POWERS
Cite as: Marcia E. Powers, Unraveling Tinker: The Seventh Circuit Leaves Student Speech Hanging by a Thread, 4 SEVENTH CIRCUIT REV. 215 (2008), at http://www.kentlaw.edu/7cr/v4-1/powers.pdf.
INTRODUCTION
In 1969, the Supreme Court placed a premium on First Amendment protection in the school when high school students protested the Vietnam War by wearing black armbands.1 In Tinker v. Des Moines Independent Community School District, the Court held that students do not “shed their constitutional rights to freedom of speech or expression at the schoolhouse gate” and allowed students to display their anti-Vietnam beliefs on their sleeves in spite of objection by the school district.2 Tinker has served as the bedrock case for First
∗ J.D. candidate, May 2009, Chicago-Kent College of Law, Illinois Institute of Technology; B.S., May 2006, University of Illinois at Urbana-Champaign. The author would like express her gratitude to Melinda Cupps Dickler, Sheldon Nahmod, Hal Morris, Sandra Stipp, and her classmates in the SEVENTH CIRCUIT REVIEW for their invaluable comments on this Note, and to Chris Gardino for inspiring the title to this Note. The author dedicates this Note to her Mom and Dad for their constant love and support. 1 Tinker v. Des Moines Indep. Cmty. Sch. Dist., 393 U.S. 503 (1969). Tinker is the most important Supreme Court case in history protecting the constitutional rights of students. Erwin Chemerinsky, Students Do Leave their First Amendment Rights at the Schoolhouse Gates: What’s Left of Tinker?, 48 DRAKE L. REV. 527, 527 (2000). 2 393 U.S. at 506.
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Amendment regulation of student speech in holding that a school cannot prohibit student speech unless it “materially and substantially disrupt[s] the work and discipline of school”3 (the “substantial disruption” standard) or “collide[s] with the rights of others” (the “rights of others” standard”).4 However, the Supreme Court has chipped away at its pro-student holding since Tinker by allowing school officials to prohibit student speech where it is lewd or vulgar,5 school-sponsored,6 or advocates illegal drug use.7 In its most recent case, Morse v. Frederick, the Supreme Court held that a school could prohibit speech that is reasonably regarded as encouraging illegal drug use.8 At the same time, the Morse majority left an ambiguity of whether political speech, such as speech supporting the legalization of illegal drugs, could be prohibited by its ruling.9 In an effort to limit the effect of the majority’s ambiguity, Justice Alito concurred to clarify that the majority opinion created another exception to Tinker for speech promoting illegal drug use and should not be read as support for restricting speech that commented on a political or social issue.10 On April 23, 2008, the Seventh Circuit rejected Justice Alito’s concurrence and applied Morse to political speech in Nuxoll ex rel.
3 Id. at 513. The Supreme Court defined the substantial disruption standard by quoting Burnside v. Byars, 363 F.2d 744, 749 (5th Cir. 1966). Id. at 509. The Court also indicated that there must be a “material and substantial interference with schoolwork or discipline” or conduct that forecasted a “substantial disruption of or material interference with school activities.” Id. at 511, 514. This Note refers to all of this language as included in the “substantial disruption” standard. 4 Id. at 513. 5 Bethel Sch. Dist. No. 403 v. Fraser, 478 U.S. 675, 685 (1986). 6 Hazelwood Sch. Dist. v. Kuhlmeier, 484 U.S. 260, 273 (1988). 7 Morse v. Frederick, 127 S. Ct. 2618, 2629 (2007). 8 Id. 9 Id. at 2620-21. Morse left the ambiguity that political speech, which was “the important constitutional value Tinker sought to protect,” could be included in the majority’s ruling. Ponce v. Socorro Indep. Sch. Dist., 508 F.3d 765, 769 (5th Cir. 2007). 10 Morse, 127 S. Ct. at 2636 (Alito, J., concurring).
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Nuxoll v. Indian Prairie School District No. 204.11 Nuxoll involved a student protest to the “Day of Silence,” a day promoted by the Gay, Lesbian, and Straight Education Network every April that advocates tolerance of others with a focus on tolerance of homosexuality.12 In April 2006, Heidi Zamecnik wore a t-shirt displaying the slogan “Be Happy, Not Gay” in counterprotest to the “Day of Silence.”13 School officials at Necqua Valley High School in Naperville, Illinois, made Zamecnik cross out the words “Not Gay;” subsequently, Zamecnik and freshman Alexander Nuxoll filed a lawsuit to enjoin the school from prohibiting the t-shirt.14 When faced with this case, the district court denied the request for a preliminary injunction relying on the Rights of Others standard from Tinker.15 In an opinion written by Judge Posner, the Seventh Circuit reversed the case relying on the substantial disruption standard in Tinker.16 The Seventh Circuit granted Nuxoll’s preliminary injunction to wear the t-shirt, which appeared to be a victory for the student speakers.17 However, the victory was fleeting as the majority adopted a new definition of Substantial Disruption that will allow schools to restrict vast amounts of speech in the future.18 Although Morse dealt with speech promoting illegal drug use, the Seventh Circuit applied the case when faced with the political message “Be Happy, Not Gay.”19 The Seventh Circuit used Morse for the proposition that a Substantial Disruption includes the psychological effects that one student’s speech would have on other students as well as the actual
11 523 F.3d 668, 674 (7th Cir. 2008). 12 Id. at 670. 13 Zamecnik ex. rel. Zamecnik v. Indian Prairie Sch. Dist. No. 204 Bd. of Educ., 2007 WL 1141597, at *2 (N.D. Ill. 2007). 14 Id. 15 Id. at *11. 16 See Nuxoll, 523 F.3d at 676. 17 Eugene Volokh, High School Student Speech and “Be Happy, Not Gay” T- Shirt, http://volokh.com/posts/1209077493.shtml (last visited Nov. 6, 2008). 18 Id. 19 Nuxoll, 523 F.3d at 674.
217 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 disorder the speech creates in the school environment.20 Thus, the Seventh Circuit held that a Substantial Disruption occurs if there is reason to believe that a type of student speech “will lead to a decline in students’ test scores, an upsurge in truancy, or other symptoms of a sick school.”21 First, this Note delves into why First Amendment jurisprudence regarding student speech on school grounds is a murky area of constitutional law. Then this Note discusses the reasoning behind the Seventh Circuit’s expansion of the “substantial disruption” standard. This Note argues that the Seventh Circuit’s definition of “substantial disruption” is contrary to Supreme Court precedent. This Note also opines that the Seventh Circuit’s opinion will allow schools to prohibit a broad range of speech and will quiet student speakers throughout the circuit. Part I discusses the evolution of the Supreme Court student speech cases, beginning with Tinker. Part II explores the confusion among lower courts when dealing with student speech cases by contrasting the approaches of two lower courts that addressed t-shirts with slogans similar to “Be Happy, Not Gay.” Part III goes over the underlying facts, the district court opinion, and the Seventh Circuit’s opinion in Nuxoll. Part IV evaluates the Seventh Circuit’s analysis in Nuxoll in light of Supreme Court precedent and opinions from other lower courts in addition to considering how Nuxoll will affect future student speech cases.
I. THE EVOLUTION OF FIRST AMENDMENT RIGHTS IN THE SCHOOL SYSTEM THROUGH THE UNITED STATES SUPREME COURT JURISPRUDENCE
There have been four major decisions that have shaped Supreme Court jurisprudence on a school’s regulation of student speech, beginning with Tinker v. Des Moines Independent Community School
20 Id. (emphasis added). 21 Id. (emphasis added).
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District.22 Tinker was the first case where the Court protected actual student expression in public schools.23 The Court made it clear in Tinker that students do not surrender their First Amendment rights when they enter a classroom.24 Over the next 40 years, the Supreme Court narrowed the student-centered holding in Tinker, allowing school authorities to restrict student speech where the speech was vulgar or lewd,25 was school-sponsored,26 or advocated the consumption of illegal drugs.27
A. Tinker v. Des Moines Independent Community School District
In 1965, a group of students wore black armbands to their school in protest of the Vietnam War.28 The school district learned of the protest and adopted a policy prohibiting the armbands.29 The students were all sent home from school and suspended until they came back without the armbands.30 Subsequently, two of the students filed suit against their school district seeking an injunction.31 In Tinker, the Court recognized that neither teachers nor students shed their First Amendment rights to freedom of speech and expression at the schoolhouse gate.32 The Court also created two
22 See 393 U.S. 503 (1969). Bethel School District No. 403 v. Fraser, 478 U.S. 675 (1986), Hazelwood School District v. Kuhlmeier, 484 U.S. 260 (1988), and Morse v. Frederick, 127 S. Ct. 2618 (2007), are the other important cases. 23 Muller v. Jefferson Lighthouse Sch., 98 F.3d 1530, 1536 (7th Cir. 1996); see also W. Va. Bd. of Educ. v. Barnette, 319 U.S. 624, 629 (U.S. 1943), (The Supreme Court first recognizing the free speech interests of public school students in holding that a compulsory flag salute exercise was an unconstitutional coercion of belief). 24 Tinker, 393 U.S. at 506. 25 See Fraser, 478 U.S. at 685. 26 See Hazelwood, 484 U.S. at 273. 27 See Morse, 127 S. Ct. at 2629. 28 Tinker, 393 U.S. at 504. 29 Id. 30 Id. 31 Id. 32 Id. at 506.
219 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 standards to determine whether a school may prohibit student speech in holding that student expression may not be restricted unless it “materially and substantially disrupt[s] the work and discipline of school” (the “substantial disruption” standard) or “collid[es] with the rights of others” (the “rights of others” standard).33 The Court found that the school’s prohibition of the armbands was unconstitutional, as the school authorities had no reason to believe that the wearing of the armbands would substantially interfere with the school environment or intrude on other students’ rights.34 The Court proclaimed that school officials could not discipline the students for “a silent, passive expression of opinion, unaccompanied by any disorder or disturbance.”35 The Court also found it significant that the school district barred only one viewpoint.36 The school district adopted a policy against wearing black armbands only but did not prohibit any other symbols of political or controversial significance.37 Thus, the Court held that the prohibition of one opinion alone was unconstitutional without evidence that it was necessary to avoid substantial interference with schoolwork or discipline.38
33 Id. at 513. 34 Id. at 509. Lower courts generally apply the substantial disruption” standard and rarely apply the “rights of others” standard. Melinda Cupps Dickler, The Morse Quartet: Student Speech and the First Amendment, 53 LOY. L. REV. 355, 363-64 (2007). 35 Tinker, 393 U.S. at 508. 36 Id. at 511. See also Abby Marie Mollen, Comment, In Defense of the “Hazardous Freedom” of Controversial Student Speech, 102 NW. U. L. REV. 1501, 1511-12 (2008) (exploring how courts have long disagreed about whether Tinker prohibits viewpoint discrimination). This issue was also a major difference between the majority and the concurrence in Nuxoll. See discussion infra Part III.C. 37 Tinker, 393 U.S. at 510. 38 Id. at 511. The Supreme Court also noted that schools should not be “enclaves of totalitarianism” and allow only beliefs the school chooses to communicate. Id. Rather, a school should be a “marketplace of ideas” which fosters learning and understanding through a “multitude of tongues.” Id.
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Justice Black’s dissent in Tinker may have been instructive to the Supreme Court when faced with future student speech cases.39 Justice Black warned that the majority’s holding would allow students to defy teachers in the name of free speech.40 He felt that the Tinker opinion would induce the school to “surrender control of the American public school system to public school students.”41
B. Lewd and Vulgar Speech: Bethel School District No. 403 v. Fraser
In 1986, the Court placed a check on student speech by allowing a school to restrict vulgar and lewd speech in Bethel School District No. 403 v. Fraser.42 The Court found that a school district acted within its authority in suspending a student who gave a speech at an assembly that contained an “elaborate, graphic, and explicit sexual metaphor.”43 The Court held that the First Amendment did not prohibit school officials from regulating lewd or offensive speech where it “would undermine the school’s basic educational mission.”44 The Court recognized that “the constitutional rights of students in the public school are not automatically coextensive with the rights of adults in other settings.”45 The majority’s deference towards the school district was readily apparent when it cited Justice Black’s dissent in Tinker for
39 See Hazelwood Sch. Dist. v. Kuhlmeier, 484 U.S. 260, 270 n.4 (1988) (noting the relevance of Justice Black’s dissent in Tinker to Fraser and Hazelwood); see also Morse v. Frederick, 127 S. Ct. 2618, 2636 (2007) (Thomas, J., dissenting) (stating that Justice Black’s dissent in Tinker “has proved prophetic”). 40 Tinker, 393 U.S. at 525 (Black, J., dissenting). 41 Id. at 526. 42 478 U.S. 675, 685 (1986). 43 Id. at 678, 685. The speech opened with the line “I know a man who is firm—he’s firm in his pants, he’s firm in his shirt, his character is firm—but most . . . of all, his belief in you, the students of Bethel, is firm.” Id. at 687 (Brennan, J., concurring). 44 Id. at 685 (majority opinion). 45 Id. at 682. The Court based this statement in part on N.J. v. T.L.O., 469 U.S. 325 (1985), which held that a school needs reasonable suspicion, and not probable cause, to search a student. Id.
221 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 the proposition that the Constitution does not compel schools to surrender control to their students.46 The Fraser decision seemed to create an exception to Tinker when the student speech was vulgar, lewd, or highly offensive.47 The Court noted a “marked distinction” between the political viewpoint addressed in Tinker and the sexual content in the student’s speech.48 The Court noted that schools had a compelling interest in prohibiting vulgar and lewd speech because of its role of teaching students “the boundaries of socially appropriate behavior”49 and because the speech could be potentially damaging to a young audience.50 Furthermore, the Court overruled the Ninth Circuit, which relied on the Tinker substantial disruption standard when finding that there was no evidence on the record that the speech caused a substantial disruption.51
C. School-Sponsored Speech: Hazelwood School District v. Kuhlmeier
Two years later, the Court again allowed school authorities to prohibit speech in Hazelwood School District v. Kuhlmeier.52 In Hazelwood, the Court ruled it constitutional for a school district to forbid articles about teen pregnancy and divorce from appearing in the school newspaper.53 The Court stressed that the school was entitled to great control over student expression that may be attributed to the school, such as a school newspaper or play.54 The Court found a
46 Id. at 686. 47 Id. at 685. 48 See id. at 680; see also id. at 685 (“Unlike the sanctions imposed on the students wearing armbands in Tinker, the penalties imposed in this case were unrelated to any political viewpoint.”). 49 Id. at 681. 50 See id. at 683 (stating that the speech was “insulting to teenage girl students” and could be “seriously damaging to its less mature audience”). 51 Id. at 679. 52 484 U.S. 260, 274 (1988). 53 Id. at 264. 54 Id. at 271.
222 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 distinction between a student’s personal expression as in Tinker and speech that might be “reasonably perceiv[ed] to bear the imprimatur of the school.”55 The Court granted school authorities greater control in prohibiting school-sponsored speech than other student expression governed under Tinker’s “substantial disruption” standard.56 Thus, the Court held that a school may restrict school-sponsored speech “so long as [its] actions are reasonably related to legitimate pedagogical concerns.”57 The Supreme Court appeared to create a clear exception to Tinker for speech that was school-sponsored.58 Like Fraser, the Court again overruled the appellate court’s application of the “substantial disruption” standard.59 Also, the majority in Hazelwood seemed to acknowledge that Fraser was a distinct exception to Tinker, rather than an application of the case.60 The dissent in Hazelwood asserted that Fraser was analyzed under Tinker.61 The majority responded to the dissent in a footnote, stating that the decision in Fraser rested on the vulgar, lewd, and plainly offensive character of the speech delivered at the school assembly rather than on any propensity of the
55 Id. 56 Id. at 272. The Court found that Tinker addressed the “educators’ ability to silence a student’s personal expression that happened to occur on the school premises,” while Hazelwood concerned that “educators’ authority over school- sponsored publications, theatrical productions, and other expressive activities that students, parents, and members of the public might reasonably perceive to bear the imprimatur of the school.” Id. 57 Id. at 273. 58 See id. at 272-73 (“Accordingly, we conclude that the standard articulated in Tinker for determining when a school may punish student expression need not also be the standard for determining when a school may refuse to lend its name and resources to the dissemination of student expression.”). 59 Id. at 265. The lower court found there was no evidence that the censored articles would have materially disrupted the school environment. Id. 60 Id. at 272 n.4. 61 Id. at 281 (Brennan, J. dissenting).
223 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 speech to “‘materially disrup[t] classwork or involv[e] substantial disorder or invasion of the rights of others.’”62
D. Speech that Advocates Illegal Drug Use: Morse v. Frederick
The Supreme Court continued to tear away students’ rights to free speech in Morse v. Frederick.63 In the 2007 case, the school district did not violate a student’s constitutional rights by prohibiting him from displaying a “BONG HiTS 4 JESUS” banner at a school- sponsored event where students watched the Olympic torch relay come through Alaska.64 The student conceded that the words meant nothing and were just “nonsense meant to attract television cameras.”65 Nonetheless, the Court decided to rule on the case66 and held that a school may restrict speech that advocates the consumption of illegal drugs.67 In reaching its decision, the Court focused on the dangers of illicit drug use and found that deterring drug use by school children was a compelling interest.68 The Court stated that “‘[s]chool years are the time when physical, psychological, and addictive effects of drugs are most severe. . .’”69 Furthermore, the effects of drugs were not only felt
62 Id. at 272 n.4 (majority opinion) (quoting Tinker v. Des Moines Indep. Cmty. Sch. Dist., 393 U.S. 503, 513 (1969)). 63 127 S. Ct. 2618, 2629 (2007). 64 Id. 65 Id. at 2624 (quoting the district court case, Frederick v. Morse, 439 F.3d 1114, 1117-18 (9th Cir. 2006)). Two law students argued that the Supreme Court only took this case because of its popularity as the “Bong Hits” case. Andrew Canter & Gabriel Pardo, Notes & Comments, The Court’s Missed Opportunity in Harper v. Poway, 2008 BYU EDUC. & L.J. 125, 125 (2008). These students argued that a more useful decision would have been to address a case like Harper. Id. 66 Morse, 127 S. Ct. at 2624. The Supreme Court found it reasonable that Principal Morse thought the banner could be perceived as promoting illegal drug use. Id. 67 Id. at 2629. 68 Id. at 2628. 69 See id. (quoting Veronica Sch. Dist. 47J v. Acton, 515 U.S. 646, 661-62 (1995)).
224 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 by the drug users, but the entire educational process was disrupted.70 Thus, the Court found that the school could prohibit speech that encouraged drug use.71 In doing so, the Court reversed the Ninth Circuit’s finding that the school district did not demonstrate that the speech gave rise to a “substantial disruption.”72 Morse appeared to set Fraser and Hazelwood out as exceptions to the Tinker.73 Fraser and Hazelwood proved that the analysis in Tinker was not “the only basis for restricting student speech.”74 The Court noted that the mode of analysis in Fraser was “not entirely clear,” but it certainly did not did not apply the “substantial disruption” standard in reaching its holding.75 Furthermore, Hazelwood was not controlling because no one would reasonably believe that the “BONG HiTS” banner bore the school’s imprimatur.76 Justice Alito, in a concurrence with Justice Kennedy, joined the majority but wrote separately to clarify some of the majority’s ambiguities.77 Justice Alito concurred in the opinion on the understanding that the case added a third exception to Tinker, along with Fraser and Hazelwood.78 He explained that the majority opinion in Morse went “no further than to hold that a public school may restrict speech that a reasonable observer would interpret as
70 Id. 71 Id. at 2629. 72 Id. at 2623. 73 Id. at 2626. 74 Id. at 2627. 75 See id. (referencing footnote four in Hazelwood where the Court disagreed with the proposition that there was no difference between the First Amendment analysis applied in Tinker and that applied in Fraser and noting that the holding in Fraser was not based on any showing of substantial disruption). 76 Id. 77 Id. at 2636 (Alito, J., concurring) 78 See id. at 2637 (“In addition to Tinker, [Morse] allows the restriction of speech advocating illegal drug use;” [Fraser] “permits the regulation of speech that is delivered in a lewd or vulgar manner as part of a middle school program;” and [Hazelwood] “allows a school to regulate what is in essence the school’s own speech.”).
225 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 advocating illegal drug use.”79 He asserted that the case “provide[d] no support for any restriction of speech that can plausibly be interpreted as commenting on any political or social issue.”80 He also opined that any argument for foregoing a Tinker analysis must be based on a special characteristic of school, and the characteristic that was relevant in Morse was the threat of the physical safety of the students.81 In his opinion, the Morse majority should not be read to permit the censorship of any speech that interferes with a school’s educational mission because that argument “can easily be manipulated in dangerous ways.”82 As evidenced by Supreme Court case law, the scale that was once tipped in Tinker to favor student speech has gradually reverted towards school authorities.83 Further, there is controversy on whether these four cases should be read as a collective whole or as each case governing its own distinct area of speech.84 The struggle to reconcile these four Supreme Court cases is apparent when reading lower court opinions across various jurisdictions.85 This problem is especially prevalent when lower courts deal with speech that is anti-homosexual because courts are reluctant to liken anti-homosexual speech to the
79 Id. at 2636. 80 Id. 81 Id. at 2638. 82 Id. at 2637. 83 Mollen, supra note 36, at 1510 (noting that, when read “together, Fraser, Hazelwood, and Morse confirm that students in fact do leave some of their First Amendment rights at the schoolhouse gate.”). 84See id. at 1510-11. When the Court ruled in Morse, it did not resolve the confusion on interpreting Tinker, Fraser, and Hazelwood. Id. at 1510. Instead the Court “added additional uncertainty to the scope of students’ free speech rights.” Id. 85 See, e.g., Nuxoll ex rel. Nuxoll v. Indian Prairie Sch. Dist. No. 204, 523 F.3d 668 (7th Cir. 2008); Nixon v. N. Local Sch. Dist. Bd. of Educ., 383 F. Supp. 2d 965 (S.D. Ohio 2005); Harper v. Poway Unified Sch. Dist., 445 F.3d 1166 (9th Cir. 2006), reh’g en banc denied, 455 F.3d 1052 (9th Cir. 2006), vacated as moot, 127 S. Ct. 1484 (2007).
226 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 political speech in Tinker.86 Section II explores how two lower court opinions approached Supreme Court precedent when faced with anti- homosexual speech. Then, Section III analyzes the Seventh Circuit’s approach to anti-homosexual speech in Nuxoll.
II. TINKERING AROUND: HOW TWO COURTS APPROACHED STUDENT SPEECH THAT WAS ANTI-HOMOSEXUAL
Before reviewing the Seventh Circuit’s approach in Nuxoll, this Note considers two possible approaches that the Seventh Circuit could have adopted.87 The two courts each dealt with similar anti- homosexual t-shirts.88 Each court interpreted Supreme Court precedent differently, which illustrates the uncertainty that courts face in this murky area of First Amendment jurisprudence.89
A. Nixon v. Northern Local School District Board of Education
The District Court for the Southern District of Ohio relied on Tinker’s “substantial disruption” standard when it addressed a t-shirt that opposed homosexuality, Islam, and abortion in Nixon v. Northern Local School District Board of Education.90 The 2005 case dealt with a black t-shirt with white lettering that read “INTOLERANT” and “Jesus said. . .I am the way, the truth and the life. John 14:6” on the front and “Homosexuality is a sin! Islam is a lie! Abortion is murder! Some issues are just black and white!” on the back.91 In its opinion, the Nixon court found that Tinker, Fraser, and Hazelwood were a trilogy that carved out three categories of student
86 Amanda L. Houle, Note, From T-Shirts to Teaching: May Public Schools Constitutionally Regulate Antihomosexual Speech?, 76 FORDHAM L. REV. 2477, 2478 (2008). 87 See Nixon, 383 F. Supp. 2d at 973; Harper, 445 F.3d at 1178. 88 Id. 89 Houle, supra, note 86, at 2497. 90 383 F. Supp. 2d at 974. 91 Id. at 967.
227 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 speech.92 Hazelwood governed school-sponsored speech, Fraser governed vulgar, lewd, obscene, and plainly offensive speech, and Tinker governed speech that fell in neither category.93 The t-shirt was a potentially offensive political viewpoint and not vulgar or lewd under Fraser’s speech exception.94 The message on the t-shirt also fell outside of Hazelwood because it was not school-sponsored.95 Thus, Tinker was the only standard that governed Nixon’s t- shirt.96 The court held that there was no evidence of any history of violence or disorder that would prohibit the t-shirt under the “substantial disruption” standard.97 The Nixon court took a narrow reading of the “rights of others” standard from Tinker and found that the invasion of the rights of others referred to the right to be secure and let alone.98 A silent, passive t-shirt did not collide with the rights of other students to be left alone.99
92 Id. at 969. 93 Id. (citing Canady v. Bossier Parish Sch. Bd., 240 F.3d 437, 442 (5th Cir. 2001) and S.G. v. Sayreville Bd. of Educ., 333 F.3d 417, 421-22 (3rd Cir. 2003)). 94 See id. at 969-971. The court noted that Fraser was applicable to Boroff v. Van Wert City Board of Education, 220 F.3d 465 (6th Cir. 2000), which found that a school could prohibit a Marilyn Manson t-shirt because Marilyn Manson sings about suicide, murder, and drugs and to Smith v. Mount Pleasant Public Schools, 285 F. Supp. 2d 987 (E.D. Mich. 2003), which held that a student’s comments referring to sexual activity of school administrators could be prohibited under Fraser. Id. at 970- 71. Fraser was not applicable to potentially offensive political viewpoints, such as a George Bush “International Terrorist” t-shirt in Barber v. Dearborn Public Schools, 286 F. Supp. 2d 847 (E.D. Mich. 2003) or a Confederate flag t-shirt in Bragg v. Swanson, 371 F. Supp. 2d 814 (W.D.W. Va. 2005). Id. at 971. 95 Id. at 969. 96 Id. at 971. 97 Id. at 973. 98 Id. at 974. 99 Id.
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B. Harper v. Poway Unified School District
Most courts completely overlook the “rights of others” standard from Tinker.100 However, the Ninth Circuit in Harper v. Poway Unified School District relied on a broad reading of the standard in a case with nearly identical facts to Nuxoll.101 In 2006, Tyler Chase Harper donned a t-shirt to protest the “Day of Silence” which read “BE ASHAMED, OUR SCHOOL EMBRACED WHAT GOD HAS CONDEMNED” on the front and “HOMOSEXUALITY IS SHAMEFUL, ‘Romans 1:27’” on the back.102 In reaching its holding, a divided Ninth Circuit first construed Supreme Court precedent as governing “three distinct areas of student speech.”103 Fraser governed vulgar and lewd speech; Hazelwood governed school-sponsored speech; and Tinker governed all other speech.104 The court decided Harper’s claim fit under Tinker;105 however, the Ninth Circuit did not analyze the case under the “substantial disruption” standard.106 Instead the court made its decision under the rarely used “rights of others” standard.107 The Ninth Circuit’s analysis concluded that Harper’s t-shirt infringed upon other students in the most fundamental way by denying
100 Andrew Etter, Casenote, Student Speech, the Rights of Others, and a Dual- Reasonableness Standard: Zamecnik ex rel. Zamecnik v. Prairie District No. 204 Board of Education, 2007 WL 1141597 (N.D. Ill.), 76 U. CIN. L. REV. 1343, 1348 (2008). 101 445 F.3d 1166, 1178 (9th Cir. 2006), reh’g en banc denied, 455 F.3d 1052 (9th Cir. 2006), vacated as moot, 127 S. Ct. 1484 (2007). 102 Id. at 1171. 103 Id. at 1176-1177 (quoting Chandler v. McMinnville Sch. Dist., 978 F.2d 524, 529 (9th Cir. 1992)). 104 Id. 105 See id. at 1177 nn.14-15. 106 Id. at 1177. 107 See id. at 1178; see also id. at 1178 n.18 (rejecting the notion that the right to be left alone from Tinker is limited to assault, defamation, invasion of privacy, extortion, blackmail, or any other tort).
229 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 the right to “‘be secure and to be left alone.’”108 In reaching its holding, the Ninth Circuit found that students have a right to be free from “physical assaults,” and the court even took judicial notice that “psychological attacks” can cause a blow to a youth’s self-esteem.109 The court then used several studies to support granting judicial notice that gay students are harmed by derogatory messages, like Harper’s t- shirt, because they are harmful to the students’ health, welfare, educational performance, and ultimate potential for success in life.110 Finally, the Harper majority limited its application of the “rights of others” standard to “derogatory and injurious remarks directed at students’ minority status such as race, religion, and sexual orientation.”111 Even though the court recognized that Tinker, Fraser, and Hazelwood governed different areas of student speech, the Ninth Circuit blended the holdings of the three cases when it determined that the school’s prohibition of the t-shirt was not viewpoint discrimination.112 The Ninth Circuit used language from those three cases when it asserted that a school may “permit, and even encourage, discussions of tolerance, equality and democracy without being required to provide equal time for student or other speech espousing intolerance, bigotry or hatred.”113
108 Id. at 1178 (quoting Tinker v. Des Moines Indep. Cmty. Sch. Dist., 393 U.S. 503, 508 (1969)). 109 Id. 110 Id. at 1179. 111 Id. at 1183. 112 Id. at 1185. 113 Id. The court found that a school may prohibit some speech under Tinker even if the consequence is viewpoint discrimination. Id. To support its proposition, the court referred to language from Hazelwood that asserted that “[a] school need not tolerate student speech that is inconsistent with its basic educational mission . . . even though the government could not censor similar speech outside the school” and to language from Fraser which stated that part of a school’s “basic educational mission” is the inculcation of “fundamental values of habits and manners of civility essential to a democratic society.” Id.
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After ruling that the “rights of others” standard was violated, the Ninth Circuit explicitly reserved judgment on whether Harper’s t-shirt would cause a “substantial disruption.”114 Furthermore, it is unclear whether the “rights of others” standard has any muster in future student speech cases.115 The dissent opined that much of the majority’s approach was “entirely a judicial creation.”116 The issue remains up- in-the-air because the Ninth Circuit denied a rehearing en banc.117 The case was granted a writ of certiorari; however, the Supreme Court dismissed the case as moot because Harper graduated from high school.118 Nonetheless, the district court in Nuxoll still used the factually similar opinion for its persuasive authority and adopted the “rights of others” standard as well.119 Then the Seventh Circuit took an even different approach than Nixon and Harper in Nuxoll.120 The Seventh Circuit’s approach in Nuxoll is discussed in Section III of this Note.
114 Id. at 1184. The district court found that the testimony from school employees who claimed the t-shirt caused tense conversations and altercations between students was not enough evidence that the t-shirt would cause a substantial disruption. Id. at 1184, 1185. 115 See, e.g., Nuxoll ex rel. Nuxoll v. Indian Prairie Sch. Dist. No. 204, 523 F.3d 668, 672 (7th Cir. 2008). 116 Harper, 445 F.3d at 1201 (Kozinski, J., dissenting). 117 See Harper v. Poway Unified Sch. Dist., 455 F.3d 1052 (9th Cir. 2006). 118 See Harper v. Poway Unified Sch. Dist., 127 S. Ct. 1484 (2007); see also Etter, supra note 100, at 1352 (arguing that the decision to vacate the case meant that the Supreme Court disagreed with the Ninth Circuit’s “rights of others” interpretation). 119 See Zamecnik ex. rel. Zamecnik v. Indian Prairie Sch. Dist. No. 204 Bd. of Educ., 2007 WL 1141597, at *9 (N.D. Ill. 2007). 120 See Nuxoll, 523 F.3d. at 674.
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III. A NOVEL APPROACH IN NUXOLL EX REL. NUXOLL V. INDIAN PRAIRIE SCHOOL DISTRICT NO. 204
A. Factual Background
The “Day of Silence” was created by the Gay, Lesbian, and Straight Education Network as an annual event to draw attention to the harassment of homosexuals.121 Some students observe the day by remaining silent in class, and some teachers will not call on them as part of observance of the day.122 Other students and faculty members support the cause by wearing t-shirts with slogans that neither support homosexuality nor criticize heterosexuality, such as “Be Who You Are.”123 In response to the “Day of Silence,” the Alliance Defense Fund (“ADF”) created an event the day after called the “Day of Truth.”124 The ADF promotes their event by wearing t-shirts that read “day of truth” on the front and “The Truth cannot be silenced” on the back.125 Starting in 2003, a student organization named the Gay/Straight Alliance sponsored the “Day of Silence” each year at Necqua Valley High School in Naperville, Illinois.126 On the 2006 “Day of Truth,” Heidi Zamecnik, a student opposed to homosexuality, remained silent and wore a t-shirt that read “My Day of Silence, Straight Alliance” on
121 Zamecnik, 2007 WL 1141597, at *1. Although the Seventh Circuit referenced homosexuals alone, the “Day of Silence” website also states that the day is intended to raise awareness to the harassment of lesbian, gay, bisexual, and transgender individuals. Gay, Lesbian and Straight Education Network, Day of Silence, http://www.dayofsilence.org/ (last visited Nov. 10, 2008). 122 Zamecnik, 2007 WL 1141597, at *1. 123 Id. 124 Id.; see also Alliance Defense Fund, Day of Truth, http://www.dayoftruth.org/main/default.aspx (last visited November 11, 2008). 125 Zamecnik, 2007 WL 1141597, at *1. 126 Id.
232 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 the front and “Be Happy, Not Gay” on the back.127 School officials required Zamecnik to cross off the “Not Gay.”128 In March 2007, Zamecnik and freshman student Alexander Nuxoll filed a lawsuit through their parents to obtain a preliminary injunction against their school district to remain silent on the “Day of Truth” and to wear shirts, buttons, or stickers containing the message “Be Happy, Not Gay.”129 The only issue in front of the District Court for the Northern District of Illinois was the constitutionality of the censorship of the slogan “Be Happy, Not Gay” because the school district stipulated that it would allow the Plaintiffs to remain silent in protest to the “Day of Silence.”130 The parties agreed to withhold discovery and to stipulate the facts in order to expedite the decision before the 2007 “Day of Silence.”131 The school district supported its ban of the “Be Happy, Not Gay” slogan on its policy prohibiting derogatory comments against other students.132 Specifically, the school’s policy forbade oral or written “derogatory comments” made on school grounds “that refer[red] to race, ethnicity, religion, gender, sexual orientation, or disability.”133 The school deemed “Be Happy, Not Gay” as a derogatory comment that referred to a particular sexual orientation.134 The school would prohibit a shirt that had “Not Gay” or any negative phrase about homosexuality.135 However, the school would allow a t-shirt that
127 Nuxoll ex rel. Nuxoll v. Indian Prairie Sch. Dist. No. 204, 523 F.3d 668, 670 (7th Cir. 2008). 128 Zamecnik, 2007 WL 1141597, at *2. 129 Id. at *6. The Alliance Defense Fund represented Plaintiffs in the lawsuit; however, Plaintiffs did not wish to be a part of the ADF’s “Day of Truth” activities. Id. at *5 Instead they wished to have their own counterprotest activities on the day after the “Day of Silence.” Id. 130 Id. at *2, *6. 131 Id. at *2. 132 Nuxoll, 523 F.3d at 670. 133 Id. 134 Id. 135 Zamecnik, 2007 WL 1141597, at *6.
233 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 displayed a positive statement, such as “Be Happy, Be Straight” or “Straight Alliance.”136
B. The District Court Opinion in Zamecnik ex rel. Zamecnik v. Indian Prairie School District No. 204 Board of Education
Similarly to Harper, the district court relied on the Tinker “rights of others” standard when it denied Zamecnik and Nuxoll’s request for a preliminary injunction.137 Through Seventh Circuit precedent and Harper, the district court found that the Seventh Circuit would likely rule that the high school’s interest in protecting its students would permit the restriction of the t-shirt.138 The Seventh Circuit had not yet ruled on a question of restricting speech that was derogatory to a category of students.139 However, the district court predicted that the Seventh Circuit would include pedagogical concerns as well as the school’s educational mission in formulating a holding, which was consistent with Harper’s use of the “rights of others” standard.140 The district court recognized that Harper did not limit considerations of a school’s “pedagogical interests” or “basic educational mission” to situations involving vulgar or lewd speech like Fraser or school-sponsored speech like Hazelwood.141 Rather, Harper used the holdings in Fraser and Hazelwood to support the notion that a school does not have to tolerate any speech that is inconsistent with its basic educational mission.142 Under this rationale, Harper noted that a public school may engage in some viewpoint discrimination, such as permitting discussions of
136 Id. at *2. 137 Id. at *11. 138 Id. 139 Id. at *10. 140 Id. 141 See id. at *8-9 (quoting Harper v. Poway Unified Sch. Dist., 445 F.3d 1166, 1185-86 (9th Cir. 2006)). 142 Id.
234 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 tolerance and equality without allowing time for speech espousing intolerance or hatred.143 To support its outcome, the district court noted that the Seventh Circuit had taken a school’s pedagogical interests into consideration even if the speech was not school-sponsored.144 Thus, the district court believed that the Seventh Circuit would find that promoting tolerance among students and protecting gay students from harassment was a legitimate pedagogical concern that would allow the school to restrict speech expressing negative statements about homosexuality.145 The court stated that “Be Happy, Not Gay” was less disparaging than the t- shirts at issue in Harper or Nixon.146 Nonetheless, the district court concluded that the t-shirt was a derogatory statement that could do significant harm to gay youth.147 In 2007, neither of the Plaintiffs wore a t-shirt that contained “Be Happy, Not Gay” or tried to protest the “Day of Silence” for fear of being punished.148 Heidi Zamecnik graduated high school, thus she lacked the standing to further pursue the case.149 Still Alexander
143 Id. 144 See id. at *10. The district court was referring to three Seventh Circuit cases where the student speech was not school-sponsored, yet the majority applied Hazelwood’s language that “a school need not tolerate speech that is contrary to its . . . educational mission.” Id. The three cases were Muller v. Jefferson Lighthouse School, 98 F.3d 1530 (7th Cir. 1996) (involving an elementary school that prohibited students from distributing religious literature); Brandt v. Board of Education of Chicago, 480 F.3d 460 (7th Cir. 2007) (concerning a school’s refusal to allow eighth graders to wear t-shirts worn in protest to the official class shirt); and Gernetzke v. Kenosha Unified School District No. 1, 274 F.3d 464 (7th Cir. 2001) (regarding a high school’s decision to forbid a cross to be painted on a school mural). Id. 145 Id. 146 Id. 147 Id. at *11. 148 Nuxoll ex rel. Nuxoll v. Indian Prairie Sch. Dist. No. 204, 523 F.3d 668, 670 (7th Cir. 2008). 149 Id.
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Nuxoll and the ADF continued to pursue the appeal in time for the 2008 “Day of Silence.”150
C. The Seventh Circuit Opinion
On appeal, the school urged the Seventh Circuit to uphold the district court’s decision and its reliance on Harper.151 The school argued that Tinker, Fraser, Hazelwood, and Morse should be read as an “interrelated framework for addressing the appropriateness of school actions” rather than “four narrow, unrelated exceptions to the notion of unbridled student speech.”152 In addition, the school cited other Seventh Circuit opinions as consistent with the district court’s acknowledgement that the Seventh Circuit takes a school’s pedagogical interests and its educational mission into consideration absent a Hazelwood school-sponsored set of facts.153 The school’s argument was bolstered by the amici curiae briefs of the Illinois Association of School Boards, Inc. and the Illinois Association of School Administrators.154 On the other side, Nuxoll argued for an approach like Nixon by reading the Supreme Court cases as a four-part framework.155 Nuxoll asserted that the slogan “Be Happy, Not Gay” must be governed by
150 See Transcript of Opinion at 1, Nuxoll ex rel. Nuxoll v. Indian Prairie Sch. Dist. No. 204, 523 F.3d 668, 670 (7th Cir. 2008) (No. 08-1050) (The opinion was released in transcript form because Nuxoll sought “a preliminary injunction to enable him to engage in an activity scheduled for April 28.”). 151 Brief of the Defendants-Appellees at 26, Nuxoll ex rel. Nuxoll v. Indian Prairie Sch. Dist. No. 204, 523 F.3d 668 (7th Cir. 2008) (No. 08-1050). 152 Id. at 15-16. 153 See id. at 29 (referring to Muller v. Jefferson Lighthouse Sch., 98 F.3d 1530 (7th Cir. 1996); Brandt v. Bd. of Ed. of Chi., 480 F.3d 460 (7th Cir. 2007); Gernetzke v. Kenosha Unified Sch. Dist. No. 1, 274 F.3d 464 (7th Cir. 2001)). 154 See Brief of Amici Curiae of Illinois Association of School Boards, Inc., et al., for Affirmance of Decision Below at 3, Nuxoll ex rel. Nuxoll v. Indian Prairie Sch. Dist. No. 204, 523 F.3d 668 (7th Cir. 2008) (No. 08-1050) (The brief argued that Tinker, Fraser, Hazelwood, and Morse are not an “‘either/or.’”). 155 Brief of Plaintiff-Appellant at 15, Nuxoll ex rel. Nuxoll v. Indian Prairie Sch. Dist. No. 204, 523 F.3d 668 (7th Cir. 2008) (No. 08-1050).
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Tinker only as it is “non-vulgar, private student speech unrelated to drugs.”156 Nuxoll asserted that the school had not provided evidence that the t-shirt would bring a “substantial disruption.”157 Nuxoll rejected the district court’s interpretation of the “rights of others” standard from Tinker alleging that the standard referred to a “substantive and verifiable right,” not a right to be free from critical or negative speech.158 The American Civil Liberties Union of Illinois filed a brief of amicus curiae supporting neither party, but advocated that Fraser, Hazelwood, and Morse should be read as exceptions to Tinker.159 The Seventh Circuit, led by Judge Posner, reversed the case in favor of Nuxoll.160 The result of Nuxoll seemed to be a victory for both parties.161 Nuxoll was allowed to display his “Be Happy, Not Gay” t-shirt in counterprotest to the “Day of Silence.”162 At the same time, the Seventh Circuit adopted a definition of “substantial disruption” that will have a farther reach for school administrators to restrict student speech.163 Judge Rovner concurred in the judgment, but would not have needed to expand upon the “substantial disruption” definition to reach her conclusion.164
156 See id. at 16-17; see also id. at 9 (“Political speech by students must be allowed in high schools unless it is drug related, vulgar, materially disruptive, or tortuously infringes with the rights of others . . . Expressing the statement ‘Be Happy, Not Gay’ does not violate any of these standards.”). 157 Id. at 26. 158 Id. at 28-29. 159 Brief of Amicus Curiae for American Civil Liberties Union of Illinois in Support of Neither Party at 7-8, Nuxoll ex rel. Nuxoll v. Indian Prairie Sch. Dist. No. 204, 523 F.3d 668 (7th Cir. 2008) (No. 08-1050). The ACLU relied in part on Justice Alito’s concurrence in Morse in making this determination. Id. 160 Nuxoll ex rel. Nuxoll v. Indian Prairie Sch. Dist. No. 204, 523 F.3d 668, 676 (7th Cir. 2008). 161 Eugene Volokh, High School Student Speech and “Be Happy, Not Gay” T- Shirt, The Volokh Conspiracy, April 24, 2008, http://volokh.com/posts/1209077493.shtml (last visited November 6, 2008). 162 Id. 163 Id. 164 Nuxoll, 523 F.3d at 676-77 (Rovner, J., concurring).
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To start its opinion, the majority acknowledged that Nuxoll could not make any negative comments about other students that constituted “fighting words” because they are outside the protection of the First Amendment.165 Nuxoll conceded at oral argument that he could not wear a shirt that read, “homosexuals go to Hell,” because they are fighting words.166 The majority used Nuxoll’s concession about “fighting words” as a jumping-off point to weigh the interests of student speech versus the harm that can be caused by too much free speech in the school environment.167 The majority found that the contribution that students can make to the public debate was “modest,” whereas the school’s countervailing interest in protecting students from offensive speech was “undeniable.”168 The majority recognized that a “heavy federal constitutional hand on the regulation of student speech by school authorities would make little sense.”169 Moreover, the court said that high school students cannot be raised in an “‘intellectual bubble’” absent discussion of important public issues.170 On the other hand, the Seventh Circuit noted the dangers in allowing too much free speech, especially of the “wounding” kind.171 The majority supported its conclusion with studies that teens who are subject to teasing and harassment find it difficult to concentrate and to exceed in school.172 The court asserted that the problems that troubled schools are having, including high drop-out rates, will not be
165 Id. at 670 (majority opinion) (citing Chaplinsky v. N.H., 315 U.S. 568, 572- 73 (1942)). 166 Id. at 671; but see id. at 678 n.3 (Rovner, J., concurring) (Judge Rovner asserted that this was not the position taken by Nuxoll and that Nuxoll conceded that his speech was governed by Tinker and not Chaplinsky.). 167 Id. at 671 (majority opinion). 168 Id. 169 Id. 170 Id. (quoting Am. Amusement Mach. Ass’n v. Kendrick, 244 F.3d 572, 577 (7th Cir. 2001)). 171 Id. 172 Id.
238 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 alleviated by “First Amendment free-for-alls.”173 Further, the majority opined that school administrators are in the better position to regulate student speech, as “judges are incompetent to tell school authorities how to run schools in a way that will preserve an atmosphere conducive to learning.”174 The majority then found that the school’s policy prohibiting derogatory comments took into account those two interests.175 The school’s policy did not halt open discussion by the students, rather it forbade only those disparaging against “unalterable or otherwise deeply rooted personal characteristics” about which most people, including students, were highly sensitive.176 In the majority’s opinion, these types of derogatory comments can “strike a person at the core of his being.”177 After weighing the competing interests, the majority went on to analyze the merits of the preliminary injunction under Supreme Court precedent.178
1. A Möbius Strip: The Seventh Circuit’s Interpretation of Tinker 179
Unlike Harper and the district court in Zamecnik, the Seventh Circuit refused to adopt the “rights of others” standard from Tinker.180 The Seventh Circuit limited the “rights of others” standard to the invasion of a legal right by another student and found that there is no legal right to prevent criticism of a student’s beliefs or lifestyle.181 After determining that the “rights of others” standard was inapplicable, the Seventh Circuit turned its attention to Nuxoll’s
173 Id. at 672. 174 Id. at 671. 175 Id. 176 Id. 177 Id. 178 Id. 179 See id. at 677 n.1 (Rovner, J., concurring). 180 Id. at 672 (majority opinion). 181 Id. (citing R.A.V. v. St. Paul, 505 U.S. 377, 394 (1992); and Boos v. Barry, 485 U.S. 312, 321 (1988)).
239 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 argument that Justice Alito’s concurrence was controlling in Morse.182 Although Justice Alito and Justice Kennedy were necessary votes in the five Justice majority, the Seventh Circuit found that the concurrence was not controlling because the Justices joined the majority in Morse.183 In doing so, the court rejected Justice Alito’s limitation that Morse had no bearing on political speech.184 Then the Seventh Circuit considered the permissible scope of the “substantial disruption” standard.185 The majority found that Tinker was distinguishable from the facts in Nuxoll because the school in Tinker had engaged in viewpoint discrimination by forbidding only black armbands protesting Vietnam and not expression that was pro- Vietnam. 186 The school district’s policy in Nuxoll was viewpoint neutral because it prohibited all derogatory comments, not just comments about heterosexuality or homosexuality.187 Because of the difference in the two cases, the majority determined that it should not use Tinker alone to determine the scope of the “substantial disruption” standard.188 Instead, the court relied on Fraser and Morse as well in making its holding.189 The majority first deduced from Morse and Fraser that a “substantial disruption” did not have to be a concern that serious consequences will ensue.190 Rather the school only needs to
182 Id. 183 Id. at 673. 184 Id. 185 Id. The court noted the school districts were given a “pretty free hand” in prohibiting speech at elementary schools or with speech not protected by the First Amendment. Id. In those scenarios, a school could prohibit student speech absent a showing of a “substantial disruption” or interference with the school environment. Id. Where those situations were missing, the Seventh Circuit found that the “substantial disruption” standard still was not absolute. Id. 186 Id. 187 Id. 188 Id. at 674. 189 Id. 190 Id.
240 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 allege facts that would reasonably lead school officials to forecast a “substantial disruption.”191 Applying Tinker, Fraser, and Morse, the Seventh Circuit next adopted a more expansive definition of “substantial disruption.”192 Specifically, the Seventh Circuit found that the concerns in Fraser and Morse were not a fear of violence.193 Fraser had looked to the state’s interests in protecting students from lewd and vulgar speech and the effect that the speech could have on young students.194 The court also found it relevant that Morse considered the psychological effects that drugs have on students.195 Using these cases, the Seventh Circuit inferred that a “substantial disruption” was not only a fear of violence, but it included any speech that would lead to “a decline in students’ test scores, an upsurge in truancy, or other symptoms of a sick school.”196 The Seventh Circuit then ruled that the school’s policy against derogatory language “appear[ed] to satisfy the test.”197 The policy appeared to maintain a school environment conducive to learning and covered the spectrum of “highly sensitive identity characteristics.”198 The majority also found that the derogatory comment policy did not constitute viewpoint discrimination as Nuxoll could advocate heterosexuality on religious grounds.199 The court conceded that this policy would not wash if applied to adults, if extended to students outside of school, or if “derogatory comments” were overextended to the sensitive.200 However, the Seventh Circuit asserted that in the unique school environment, “school authorities have a protective
191 Id. 192 Id. 193 Id. 194 Id. 195 Id. (emphasis added). 196 Id. (emphasis added). 197 Id. 198 Id. 199 Id. 200 Id.
241 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 relationship and responsibility to all the students.”201 Thus, Nuxoll was not entitled to a preliminary injunction against the policy.202 Despite ruling in favor of the school district’s policy, the Seventh Circuit took the middle ground when it ruled that “Be Happy, Not Gay” was only “tepidly negative” and not in violation of the school’s policy.203 The majority stated that “Be Happy, Drink Pepsi” would not be disparaging to Coke.204 Once the majority realized that its Pepsi- Coke analysis “missed the mark” on the facts in Nuxoll, it found that the phrase “Be Happy, Not Gay” was not demeaning or derogatory to other students.205 The phrase would not “poison the educational atmosphere” or cause incident in the classrooms.206 The close of the opinion foreshadowed that Nuxoll would continue to challenge the Seventh Circuit’s narrow ruling.207 The majority called for the district court to strike a balance between a student’s right to campaign against sexual orientation and the school’s interest in maintaining a school environment where students are not distracted by debates over sexual identity.208
2. Judge Rovner Weighs in on her Brothers209
Although Judge Rovner concurred in the judgment, she expressed her dismay at the majority’s analysis under Tinker.210 She compared the majority’s portrayal of Tinker to a Möbius strip, a geometrical
201 Id. at 674-75. 202 Id. at 675. 203 Id. at 676. 204 Id. at 675. 205 Id. at 675-76. 206 Id. at 676. 207 Id. 208 Id. 209 Judge Rovner referred to Judge Posner and Judge Kanne as her brothers three times in her concurrence. See id. at 677, 678, 679 (Rovner, J., concurring). 210 Id. at 676.
242 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 shape that twists 180° to form a continuous one-sided surface.211 Judge Rovner opined that Tinker was not a viewpoint case because the Supreme Court never mentioned whether the school allowed speech or expressions favorable to the U.S. involvement in the Vietnam War.212 Rather Tinker was a case about subject matter discrimination, and Judge Rovner would not limit Tinker to a situation where a school banned all discussion of a particular subject.213 Judge Rovner also disagreed with the majority’s interpretation of Supreme Court precedent.214 First, she opposed the majority’s use of Hazelwood reasoning in a case that did not involve school-sponsored speech.215 Although the majority never mentioned the Hazelwood case, she opined that the majority “expend[ed] much ink trying to strike a balance between the interests of free speech and ordered learning, a discussion which sound[ed] remarkably similar to the rule of Hazelwood.”216 Second, Judge Rovner diverged from the majority’s expansion of the “substantial disruption” definition.217 Judge Rovner opined that this case was a simple “substantial disruption” case, and Nuxoll should have prevailed under the standard delineated in Tinker.218 She would not have applied Fraser or Morse in ruling for Nuxoll.219 She would have ruled that the school district did not provide sufficient evidence that reasonably would have led school authorities to forecast a substantial disruption, and there was not evidence of substantial disruption when Heidi Zamecnik wore the t- shirt two years prior.220
211 Id. at 676 n.1. 212 Id. at 677. 213 Id. 214 Id. 215 Id. 216 Id. 217 Id. at 676, 677. 218 Id. 219 Id. 220 Id. at 677.
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In addition, Judge Rovner did not like the majority’s characterization of Nuxoll’s t-shirt as only “tepidly negative.”221 Judge Rovner found that the t-shirt was “clearly intended to derogate homosexuals.”222 Nonetheless, the t-shirt slogan was not the kind of speech that materially and substantially interfered with school activities.223 Finally, Judge Rovner advocated the value of speech among high school students and called for the judiciary to protect open debate in schools.224
IV. EVALUATION OF NUXOLL: WHY THE SEVENTH CIRCUIT’S APPROACH WAS NOT SO “HAPPY”
Although the Seventh Circuit reversed the district court’s decision for Alexander Nuxoll, the case seemed to be a success for the school district.225 Through its majority opinion, the Seventh Circuit adopted a very broad definition of “substantial disruption” that will allow school officials to restrict a wide range of student speech in future cases.226 The effects of this decision will likely quiet the voices of student speakers in the Seventh Circuit.227
221 Id. at 678. 222 Id. at 679. Judge Rovner cited to Nuxoll’s brief, where he criticized homosexual behavior. Id. She also found that teenagers today commonly use the expression “gay” as a negative term, such as “that sweater is so gay.” Id. 223 Id. 224 Id. at 680. 225 Volokh, supra note 161. 226 Id. 227 See Logan v. Gary Cmty. Sch. Corp., 2008 WL 4411518, at *5 (N.D. Ind. 2008) (Referring to Nuxoll, the court stated that “[t]he Seventh Circuit has shown its reluctance to interfere with school officials’ rules in running a local school.”).
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A. The Seventh Circuit Should Have Followed Justice Alito’s Concurrence in Morse v. Frederick
In its ruling in Nuxoll, the Seventh Circuit ignored Justice Alito’s concurrence and instead only focused on the majority in Morse.228 The Seventh Circuit found that Justice Alito’s concurrence was not controlling; rather Justice Alito “wanted to emphasize that in allowing a school to forbid student speech that encourages the use of illegal drugs the Court was not giving schools carte blanche to regulate student speech.”229 In ignoring Justice Alito’s concurrence, the Seventh Circuit extended the majority’s reasoning for restricting illegal drug use to prohibiting political speech protected under Tinker.230 In his concurrence in Morse, Justice Alito, joined by Justice Kennedy, wrote to make the limitations of Morse clear.231 Justice Alito made two distinct points about the majority’s decision:
(a) [I]t goes no further than to hold that a public school may restrict speech that a reasonable observer would interpret as advocating illegal drug use and (b) it provides no support for any restriction of speech that can plausibly be interpreted as commenting on any political or social issues such as the wisdom of the war on drugs or legalizing marijuana for medicinal use.232
Justice Alito further explained that the majority opinion rejected any argument that public schools could censor speech on the basis that it interferes with its educational mission.233 The concurrence also
228 Nuxoll, 523 F.3d at 673. 229 Id. 230 Morse v. Frederick, 127 S. Ct. 2618, 2636 (2007) (Alito, J., concurring). 231 Id. 232 Id. (emphasis added) (internal citation and quotation marks omitted). 233 Id. at 2637.
245 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 made it explicitly clear that the decision in Morse was at “the far reaches of what the First Amendment permits.”234 In ignoring Justice Alito’s concurrence, the Seventh Circuit failed to appreciate its significance to the majority opinion in Morse.235 When determining the value of a concurrence that joins the majority opinion, lower courts should consider whether the Justice’s vote was numerically necessary.236 The willingness of the majority to accommodate is often directly proportional to the number of votes supporting the majority’s result.237 When a vote is numerically necessary, such as the fifth vote, the willingness to accommodate is at its peak.238 On the other hand, the majority’s willingness to accommodate is unnecessary when a majority vote has already been procured.239 In Morse, there is a strong argument that Justice Alito’s concurrence should be read in conjunction with the majority opinion.240 Justice Alito and Justice Kennedy were the crucial fourth and fifth votes to the five Justice majority.241 And contrary to the case cited by the majority in Nuxoll,242 Justice Alito did not write his
234 Id. at 2638 (emphasis added). 235 See Ponce v. Socorro Indep. Sch. Dist., 508 F.3d 765, 768 (5th Cir. 2007) (The Fifth Circuit found that Justice Alito’s opinion was “controlling.”). 236 Igor Kirman, Note, Standing Apart to Be a Part: The Precedential Value of Supreme Court Concurring Opinions, 95 COLUM. L. REV. 2083, 2105 (1995) (assuming that Justice Alito’s concurrence is considered a simple concurrence.). 237 Id. at 2106. 238 Id. 239 Id. 240 See Eugene Volokh, What Did Morse v. Frederick Do to the Free Speech Rights of Students Enrolled in K-12 Schools, The Volokh Conspiracy, June 26, 2007, http://volokh.com/posts/1182830987.shtml (last visited November 30, 2008) (proposing that “Justice Alito’s opinion, as the narrowest grounds offered by any of the Justices whose votes were necessary for the majority, thus seems to offer the controlling legal rule.”). 241 Morse v. Frederick, 127 S. Ct. 2618, 2636 (2007) (Alito, J., concurring). 242 See McKevitt v. Pallasch, 339 F.3d 530, 531-32 (7th Cir. 2003). The Seventh Circuit, led by Judge Posner, expressed doubt that Justice Powell’s
246 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 concurrence to extend the majority opinion past its scope.243 He wrote separately to make it clear that he joined the majority on the understanding that Morse was at the “far reaches of what the First Amendment permits.”244 In rejecting Justice Alito’s concurrence, the Seventh Circuit has given Morse a broader range.245 Not only did the Seventh Circuit apply Morse to political speech, the Seventh Circuit also ignored Justice Alito’s restriction that the reason for foregoing a Tinker analysis in Morse was because there was a threat to the physical safety of children.246 Instead the Seventh Circuit locked in on language from the majority opinion referencing the psychological harms caused by illegal drugs.247 Using this line from Morse, the Seventh Circuit asserted, “Imagine the psychological effects if the plaintiff wore a T- shirt on which was written ‘blacks have lower IQs than whites’ or ‘a woman’s place is in the home.’”248 In finding that psychological effects of speech can play into a Tinker analysis, the Seventh Circuit abandoned the rationale from Tinker that suppressing speech in the school environment requires more than a “mere desire to avoid the discomfort and unpleasantness that always accompany an unpopular
concurrence in Branzburg v. Hayes, 408 U.S. 665 (1972), was controlling even though he was the crucial vote to the majority opinion. Id. 243 Morse, 127 S. Ct. at 2638 (Alito, J., concurring). 244 Id.; see also Ponce v. Socorro Indep. Sch. Dist., 508 F.3d 765, 768 (5th Cir. 2007). Justice Alito’s “concurring opinion appear[ed] to have two primary purposes: providing specificity to the rule announced by the majority opinion, and, relatedly, ensuring that political speech will remain protected within the school setting.” Id. 245 Volokh, supra note 161. 246 Nuxoll ex rel. Nuxoll v. Indian Prairie Sch. Dist. No. 204, 523 F.3d 668, 674 (7th Cir. 2008) (emphasis added); see also Miller v. Penn Manor Sch. Dist., 588 F. Supp. 2d 606, 625 (E.D. Pa. 2008) The court relied on Justice Alito’s concurrence in Morse to hold that school administrators did not have to demonstrate a substantial disruption where student’s t-shirt conveyed a message of “force, violence, and violation of the law in the form of illegal vigilante behavior.” Id. 247 Nuxoll, 523 F.3d at 674 (emphasis added). 248 Id.
247 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 viewpoint.”249 And if other courts follow this approach of looking at psychological effects of student speech unrelated to drugs, it could give Morse a very long reach.250 For example, this type of reasoning would arguably give the courts in Nuxoll and Harper ample justification for restricting any political speech that could be perceived as potentially hateful.251
B. The Seventh Circuit Should Not Have Inferred from Fraser and Morse When Defining “Substantial Disruption”
Instead of adhering to the Tinker definition of the “substantial disruption” standard, the Seventh Circuit used Fraser and Morse to redefine a “substantial disruption.”252 Tinker defined a “substantial disruption” as a finding that student speech would “materially and substantially disrupt the work and discipline of school.”253 The Seventh Circuit’s interpretation of the “substantial disruption” standard arguably extends farther than Tinker would have ever allowed.254 In Nuxoll, the Seventh Circuit inferred from Fraser and Morse that a “substantial disruption” could be included in a particular type of speech that would lead to “a decline in students’ test scores, an upsurge in truancy, or other symptoms of a sick school.”255 Specifically, the Seventh Circuit relied on how both cases took into
249 See Tinker v. Des Moines Indep. Cmty. Sch. Dist., 393 U.S. 503, 509 (1969). 250 Clay Calvert, Misuse and Abuse of Morse v. Frederick by Lower Courts: Stretching the High Court’s Ruling Too Far to Censor Student Expression, 32 SEATTLE U. L. REV. 1, 28 (2008). 251 Id. 252 Nuxoll, 523 F.3d at 674. 253 Tinker, 393 U.S. at 513. 254 Nuxoll, 523 F.3d at 674; see also Volokh, supra note 161 (noting that “[T]he majority would tolerate a wide range of broad, vague, and viewpoint-based restrictions on student speech.”). 255 Nuxoll, 523 F.3d at 674.
248 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 account something more than a disorder or disturbance.256 Fraser examined how a vulgar, sexually charged speech could seriously damage an audience on the verge of sexuality.257 Morse was fearful of the physical, psychological, and addictive effects that illegal drugs have on youth.258 The Seventh Circuit used these concerns to conclude that a school could prohibit student speech absent an actual disorder or disturbance.259 One problem with the Seventh Circuit’s expansion of the “substantial disruption” standard is that neither Fraser nor Morse relied on the “substantial disruption” standard in reaching their holdings.260 The Supreme Court noted in Morse that the mode of analysis in Fraser was unclear, but it certainly did not conduct the “substantial disruption” analysis prescribed by Tinker.261 The Court bypassed the “substantial disruption” standard in Fraser because of the school district’s compelling interest in protecting minors from lewd and offensive language.262 The Supreme Court found that a school district should be able to restrict vulgar language because it could be confusing and potentially damaging to youth on the verge of sexuality.263 Significantly, the Court also noted the “marked distinction” between the political speech in Tinker and the sexual content in the student’s speech.264 The Supreme Court in Morse did not apply the “substantial disruption” standard because it found that preventing illegal drug use
256 Id. 257 Bethel Sch. Dist. No. 403 v. Fraser, 478 U.S. 675, 683 (1986). 258 Morse v. Frederick, 127 S. Ct. 2618, 2628 (2007). 259 Nuxoll, 523 F.3d at 674. 260 See Fraser, 478 U.S. at 685 and Morse, 127 S. Ct. at 2629; see also Dickler, supra note 34, at 373 (asserting that the “substantial disruption” test was eschewed in Fraser, Hazelwood, and Morse). 261 Morse, 127 S. Ct. at 2627. Although the Supreme Court has set Fraser out as an exception to Tinker, it “has not clarified the debate on what that exception is.” DePinto v. Bayonne Bd. of Educ., 514 F. Supp. 2d 633, 638 n.1 (D. N.J. 2007). 262 Fraser, 478 U.S. at 684. 263 Id. at 683. 264 Id. at 680.
249 SEVENTH CIRCUIT REVIEW Volume 4, Issue 1 Fall 2008 among youth was a compelling interest that should forego a Tinker analysis.265 Morse recognized that deterring drug use was an important interest because of the dangers of the physical, psychological, and addictive effects of drugs are most severe during youth.266 The Supreme Court classified the danger of illicit drug use as far more serious and palpable than Tinker’s concern that schools may not restrict speech because of “‘a mere desire to avoid the discomfort and unpleasantness that always accompany an unpopular viewpoint.’”267 Morse represented the school’s right to ban speech that advocated the use of illegal drugs, which was an independent exception from the Tinker “substantial disruption” standard.268 Another problem with the Seventh Circuit’s analysis in Nuxoll is that it appears that a majority of the Justices in the Supreme Court would not apply Morse to the definition of “substantial disruption.”269 As discussed, Justices Alito and Kennedy joined the majority on the understanding that Morse had no bearing on political speech protected by Tinker.270 Those Justices would permit the regulation of lewd or vulgar speech under Fraser, school-sponsored speech under Hazelwood, and speech that advocated illegal drug use under Morse.271 Any other speech would be regulated under Tinker.272
265 Morse, 127 S. Ct. at 2629. 266 Id. at 2628 (quoting Veronica Sch. Dist. 47J v. Acton, 515 U.S. 646, 661-62 (1995)). 267 Id. at 2629 (quoting Tinker v. Des Moines Indep. Cmty. Sch. Dist., 393 U.S. 503, 509 (1969)). 268 Id. at 2637 (Alito, J., concurring). 269 See id. at 2637, 2634 (Thomas, J., concurring), 2646 (Stevens, J., dissenting). 270 Id. at 2636 (Alito, J., concurring). 271 Id. at 2637. Justice Alito also wrote the majority opinion in Saxe v. State College Area School District, 240 F.3d 200, 214 (3d Cir. 2001), where he asserted that Fraser allowed a school to regulate lewd and vulgar speech, Hazelwood allowed the prohibition of school-sponsored speech, and Tinker governed all other speech. 272 Morse, 127 S. Ct. at 2637 (Alito, J., concurring).
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In Justice Thomas’s concurrence, he also found that Morse created a new exception to Tinker, along with Fraser and Hazelwood.273 It also appeared as though Justices Stevens, Souter, and Ginsburg considered Morse to be another exception to Tinker in their dissent.274 The dissent recognized that the majority “carv[ed] out” pro-drug speech from the protection of the First Amendment.275 Thus, if these five Justices were to align (at a minimum), they would make a majority of the Court reading Morse as an exception to Tinker and most likely disagreeing with the Seventh Circuit’s application of Morse.276 The Seventh Circuit should have remained true to Tinker’s definition of “substantial disruption” when dealing with “Be Happy, Not Gay,” a passive, political message.277 If the Seventh Circuit had done so, it would have reached its holding easily, as Judge Rovner did in her concurrence.278 The Seventh Circuit should have found that the school district had no evidence that would forecast a material or substantial interference with the work or discipline of school and that there was no disruption two years earlier.279 The Seventh Circuit should have reversed the case in favor of Alexander Nuxoll without confusing “substantial disruption” by including Fraser and Morse in its definition.280
273 See id.at 2634 (Thomas, J., concurring) (“Today, the Court creates another exception.”). 274 Id. at 2646 (Stevens, J., dissenting). 275 Id. 276 Id. at 2637 (Alito, J., concurring), 2634 (Thomas, J., concurring), 2646 (Stevens, J., dissenting). 277 Brief of the Plaintiff-Appellant at 15, Nuxoll ex rel. Nuxoll v. Indian Prairie Sch. Dist. No. 204, 523 F.3d 668 (7th Cir. 2008) (No. 08-1050) (asserting that Nuxoll’s expression falls under Tinker, not under Fraser, Hazelwood, or Morse). 278 Nuxoll ex rel. Nuxoll v. Indian Prairie Sch. Dist. No. 204, 523 F.3d 668, 676-77 (7th Cir. 2008) (Rovner, J., concurring) 279 Id. at 677. 280 Id.
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CONCLUSION
At the end of the Nuxoll decision, Judge Posner predicted that this lawsuit would continue.281 Alexander Nuxoll will want to wear more controversial t-shirts in attempt to push the boundaries of his First Amendment rights.282 And Nuxoll will not be alone in his attempts to see how far he can stretch his free speech rights at school. It is likely that there will be more students testing the outer limits of First Amendment jurisprudence. With more student speech cases, comes more confusion among lower courts. This confusion is clearly illustrated when comparing the vastly different approaches taken to similar student speech challenges in Nuxoll, Zamecnik, Harper, and Nixon. Perhaps these four opinions illustrate that Judge Posner was right when he said that judges are incompetent to tell school administrators how to run schools in a way that is conducive to learning.283 Maybe the problems that American school districts are facing will not be solved by “First Amendment free-for-alls.”284 Or maybe Judge Rovner was correct when she asserted the need for the judiciary to intervene in student speech cases in order to prevent schools from stifling young minds.285 Perhaps courts should protect open debate on controversial topics, and the school should only step in when the speech becomes substantially disruptive.286 Either way, the Supreme Court should see Judge Posner’s foreshadow at the end of Nuxoll as a call for the Court to clarify this murky area of the law. That way, courts will know how to proceed in future student speech cases, and there will be no more opinions that can be compared to a Möbius strip.
281 Id. at 676 (majority opinion). 282 Id. 283 Id. at 671. 284 Id. at 672. 285 Id. at 679-680 (Rovner, J., concurring) (quoting W. Va. Bd. of Educ. v. Barnette, 319 U.S. 624, 637 (U.S. 1943)). 286 Id. at 680.
252