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G ICHAEL ICHAEL EVIKA ANIEL AROLINE LAUDIA OURTNEY LARA LLISON OBERT ATHERINE IMBERLY ANDOLL IMOTHY AYMOND ISHLINN ONY EITH RIAN ANCE DWIN LLIOTT RANCES IRAN EBASTIAN EAN UCHITA ACOB T R K E J A R K C K Y R M B F M L S T C S C C D E D Development EditorsA Note Editors Executive Article EditorsS Senior Articles Editors \\jciprod01\productn\n\nys\73-2\FRONT732.txt unknown Seq: 5 22-MAY-18 8:19 40268-nys_73-2 Sheet No. 3 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 3 40268-nys_73-2 40268-nys_73-2 Sheet No. 3 Side B 05/23/2018 07:56:14 vi \\jciprod01\productn\n\nys\73-2\FRONT732.txt unknown Seq: 6 22-MAY-18 8:19 40268-nys_73-2 Sheet No. 3 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 3 40268-nys_73-2 40268-nys_73-2 Sheet No. 4 Side A 05/23/2018 07:56:14 323 275 201 243 159 WN Adin Pearl Beth Shane O ORLD Oscar G. Chase EDERAL TS S. Riane Harper I F W S ’ OUNDATION OF OURTH Saurabh Vishnubhakat F F RAN HE I EGULATION R : T PPROACH NTERVENE IN ? OTES A URVIVE I IRST AND RONE RTICLES N S ROOF FOR THE A D ”: F XCEPTION TO THE P FFICE RAN E PTIMAL I CCESSION O URISDICTION O A J N XPOSURE : A ATENT TATUTES E URDEN OF UNCTION P CT F ” S IMENSIONS OF B UDICIAL SUMMARY SUMMARY OF CONTENTS A J D ANCTIONS ON NOWING RGANIZATION AN THE LAIMS O C “K ? C U.S. S EGISTRATION HEN ISCRETIONARY ASES AN ONSENT TO ORT FTER MENDMENT RADE SSIGNING THE D T A A W C C T A C “R \\jciprod01\productn\n\nys\73-2\FRONT732.txt unknown Seq: 7 22-MAY-18 8:19 40268-nys_73-2 Sheet No. 4 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 4 40268-nys_73-2 40268-nys_73-2 Sheet No. 4 Side B 05/23/2018 07:56:14 viii \\jciprod01\productn\n\nys\73-2\FRONT732.txt unknown Seq: 8 22-MAY-18 8:19 40268-nys_73-2 Sheet No. 4 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 4 40268-nys_73-2 40268-nys_73-2 Sheet No. 5 Side A 05/23/2018 07:56:14 R R R R R R R R R R . AR- EV C , 36 Tanya J. . . . . 174 N.Y.U. L. R see also note 2...... 168 supra Pennoyer’s Ghost: Consent, Registra- ...... 180 I. Daimler AG v. Bauman, 90 Monestier, 159 ...... 174 ...... 181 States primarily incentivize registra- 3 ...... 188 ...... 197 see also INTRODUCTION OSCAR G. CHASE* , N.Y. C.P.L.R. 105 (McKinney 2018)...... 159 note 2; ...... 199 THE FOUNDATION OF supra See, e.g. Constitutional Jurisdiction ?...... 194 “REGISTRATION” “REGISTRATION” STATUTES 1. Incentives to Registration Are 2. Incorporation as Consent to General Registration may carry with it an obligation to pay taxes 1343, 1345 (2015); Kevin D. Benish, . 2 Registration Statutes, General Jurisdiction, and the Fallacy of Consent Benish, EV A. The Development of B.Consent by Registration Consent or Compulsion? Daimler See to “register” with a designated official if they do business in 1 Every state has enacted a statute that requires foreign corpora- L. R L. I. Introduction 1. A corporation is considered “foreign” in any state other than that in which 2. Genuine Parts Co. v. Cepec, 137 A.3d 123, 125 (Del. 2016); * Russell D. Niles Professor of Law, New York University School of Law. I am 3. V. The Issue of Notice II. New York’s Registration Requirement CONSENT CONSENT TO JUDICIAL JURISDICTION: IV. Does Registration Juristdiction Undermine VI. Conclusion III. Consent to Jurisdiction tions Lenoff, and Charles Straut. Finally, Filomen D’Agostino I and Max E. acknowledge Greenberg Research Funds. financial support from the it is incorporated. very grateful to Linda Silberman for her helpful insights and critiques throughout. I am grateful, too, for colleagues who read and commented on Jaramillo. Sarah by provided research excellent this the for and Workshop Faculty NYU paper at the I also thank the student research assistants who have also been of important help: Andrew Breland, Wesley Erdelack, Leonid Grinberg, Jon Hutchinson, Michael \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 1 22-MAY-18 10:16 that state. DOZO or fees or to designate a state official as an agent for the service of process on the corporation. tion Statutes and General Jurisdiction After 1609, 1647–61 (2015) (listing and summarizing all state registration statutes). Monestier, 40268-nys_73-2 Sheet No. 5 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 5 40268-nys_73-2 40268-nys_73-2 Sheet No. 5 Side B 05/23/2018 07:56:14 5 see and The 8 6 ESTATE- R Of signifi- 4 see also note 2, at 1347; . 1971) (“By authoriz- .” (emphasis in origi- NST supra I note 2, at 1647–61. AW Despite this history, two history, this Despite 7 . L M , 137 A.3d at 148 (holding after supra A general jurisdiction ] (internal citations omitted) (jurisdiction But see Cepec Pennsylvania Fire Insurance Co. of Phila- § 44 cmt. a ( note 2, at 1366. n.125 (citing cases in Arizona, AWS have led some courts and academics to re- L 9 , supra note 2 at 1366; Benish, Pennsylvania Fire note 2, at 1647 (“[S]ix states have made it clear that registra- Goodyear Dunlop Tires Operation, S.A. v. Brown supra , 571 U.S. 117 (2014). ONFLICT OF supra Monestier, Unquestionably, these cases eviscerated the long- ) C 10 Daimler AG v. Bauman, 571 U.S. 117, 122 (2014) (establishing that held that a court may assert general jurisdiction over a foreign corpora- ECOND See Daimler AG But see (S 6. 7. “If by a corporate vote it had accepted service in this specific case, there 5. Benish, 10. Professor Monestier argues that general jurisdiction by registration is un- 4. Monestier, 8. Goodyear Dunlop Tires Operation, S.A. v. Brown, 564 9. U.S. 915 (2011). nal)). Delaware, Florida, Georgia, Iowa, Kansas, Minnesota, Mississippi, New Jersey, New Mexico, New York, Pennsylvania, and Vermont, as states where corporate registra- tion confers general jurisdiction). Professor Monestier’s article that the Delaware registration statute did general jurisdiction). not allow Goodyear tion only when the corporation is deemed at home in the forum state). would be no doubt of the jurisdiction of the state court over a transitory action of contract. If it had appointed an agent authorized such cases, there would be equally little doubt. It did appoint an agent in language in terms to receive service in that rationally might be held to go to that length. The language has been held to go to that length, and the construction did not deprive the defendant of due pro- cess of law even if it took the defendant by surprise, which we have no warrant to assert.” Pa. Fire Ins. Co. of Phila. v. Gold Issue Mining & Milling Co., 243 U.S. 93, 95 (1917) [hereinafter tion to do business results in ‘consent’ to constitutional because “registration cannot fairly be regarded as express—or even implied—consent to personal jurisdiction.” Monestier, acquired in Missouri over defendant, a Pennsylvania insurance company the fact that the claim was for damage to buildings in Colorado, and there were no despite apparent connections with Missouri other than the registration); MENT 160 tion by closing their courts to NYU nonregistrant foreign that ANNUAL corporations “do business” SURVEY in the OF state until AMERICAN they LAW do register. [Vol. 73:159 Thus, in those states the registered entity will be subject to jurisdic- tion, whether or not it has any other connections to the states. \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 2 22-MAY-18 10:16 examine the continued viability of general jurisdiction-by-registra- tion laws. cance to this Article, some states interpret registration as consent to the exercise of general jurisdiction by the courts of those states. recent decisions, Daimler AG v. Bauman Supreme Supreme Court upheld registration as a mode of obtaining general jurisdiction a century ago in delphia. v. Gold Issue Mining and Milling Co. ing an agent or public official against it, the corporation consents to to the exercise by the accept state of judicial jurisdic- service of process tion over it as to in all causes of action to actions which the authority of the brought agent or official extends. This consent is effective even though no other basis exists for the exercise of jurisdiction over the corporation.”). 40268-nys_73-2 Sheet No. 5 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 5 40268-nys_73-2 40268-nys_73-2 Sheet No. 6 Side A 05/23/2018 07:56:14 , 15 and Daimler )). and Professor , the Court Cepec 15 Goodyear Registration, Fairness went a step fur- Goodyear Goodyear Section III.B. In 571 U.S. at 138); Brown v. Daimler 11 infra 12 Daimler The purported consent of the .’” (emphasis added in Jack B. Harrison, 14 . 1163, 1163 (2003) (the unpredictability 477, 480–81 (2016) (registration statutes EV . Jurisdiction over Foreign Corporations Based on limitations). EV But see Registration Statutes, Personal Jurisdiction, and the . L. R Genuine Parts Co. v. Cepec, 137 A.3d 123, 136 . L. R Daimler note 2, at 1377–401; EB OLUM ‘is not whether a foreign corporation’s in-forum con- N C see also Court “confirmed that the proper inquiry for general supra , 95 , 103 , D. Craig Lewis, , 564 U.S. at 929 (reversing the Supreme Court of North Caro- Goodyear Daimler note 2, at 1613–14 (“[I]n the twenty-first century there is no , 137 A.3d at 141 (quoting , 571 U.S. at 137 (“With respect to a corporation, the place of in- . 1, 4 (1990) (“[T]reating a foreign corporation’s appointment of a supra See, e.g. . L Monestier, at 919. 13 , namely that a corporation can be subject to general juris- ORP See Goodyear Id. Daimler See Cepec See The contemporary argument against general jurisdiction by re- 11. 12. 13. 14. 15. . J. C Benish, EL cases, commentators asserted the unconstitutionality of restriction-based general Registration and Appointment of an Agent: An Unconstitutional Condition Perpetuated held that jurisdiction could be effected only if the defendant corpo- ration was “at home” in the forum state. gistration is that it undermines the core Daimler holding of diction only where it is “at home.” for altering the state’s jurisdictional power over the corporation imposes an uncon- an imposes corporation the over power jurisdictional state’s the altering for stitutional condition on a foreign corporation’s opportunity to transact business in the state.”); Lee Scott Taylor, Note, Problem of Predictability resident agent, in compliance with a state’s registration requirements, as the basis also jurisdiction. D 2018] applied doctrine that had allowed state courts to exercise general jurisdiction over CONSENT foreign TO JUDICIAL JURISDICTION corporations continuous” that activities within their borders. had “substantial and 161 \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 3 22-MAY-18 10:16 registrant does not avoid the limitations of those ment cases, goes, the because argu- the “consent” is not freely given. are constitutional despite the constitutional basis for asserting general jurisdiction through a corporation’s com- pliance with state registration statutes.”). Even prior to the that registration statutes produce “invalidates the consent theory upon which . . . personal jurisdiction is premised”). and General Jurisdiction ther and limited the number of “homes” a corporation could have. A corporation, the Court opined, could have two “homes,” but no more than two: its state of incorporation and its principal place of business. lina’s decision to exercise general Goodyear did not have jurisdiction continuous and systematic business contacts to render it on at the grounds that home in North defendant Carolina). jurisdiction under tacts can be said to be in some sense continuous and systematic, it is whether that corporation’s affiliations with the State are render [it] essentially so at home in continuous the forum and State systematic as to diction.” (cleaned up)); (Del. 2016) (the corporation and principal place of business are paradigm bases for general juris- Lockheed Martin Corp., 814 F.3d 619, 638–39 (2d Cir. 2016); Keeley v. Pfizer, No. 4:15CV00582 ERW, 2015 WL 3999488, at *4 (E.D. Mo. July 1, 2015). 40268-nys_73-2 Sheet No. 6 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 6 40268-nys_73-2 40268-nys_73-2 Sheet No. 6 Side B 05/23/2018 07:56:14 / to ). Good- , 814 F.3d Part V. Goodyear nor Goodyear ); discussion infra , 571 U.S. at 138 Daimler Daimler 18 Daimler Lockheed Martin discussion that has not consented see Perkins v. Benguet Consol. Mining Consol. Benguet v. Perkins , 571 U.S. at 129 (quoting Daimler , forecloses such an easy use of [consent] to es- , 814 F.3d at 641; , 137 A.3d at 141 (citing Despite the Court’s apparent distinction of Goodyear note 2, at 1347. have effectively invalidated one version of cor- 19 and supra see also Cepec Lockheed Martin Daimler Pfizer, 2015 WL 3999488, at *4 (consent to general jurisdiction Daimler see Finally, a variation on the due process argument focuses Goodyear Dunlop Tires Operation, S.A. v. Brown, 564 U.S. 915, the Court tacitly implied that corporate consent was still and 17 Another objection is the prediction that many if not all . See 16 I take the contrary position and contend that registration juris- Section III.B; 18. “[I]t could be concluded that a carefully drawn state statute that expressly 19. 16. Monestier, 17. “[I]n our view, the Supreme Court’s analysis in recent decades, and in challenges the role of corporate registration as a source of remains ‘[t]he textbook case of general jurisdiction appropri- n.18). required consent to general jurisdiction as a condition on a foreign corporation’s doing business in the state, at least in cases brought by state residents, might well be constitutional. . . . We need not reach that question here, however, because we conclude that the Connecticut business registration statute did not defendant] to consent to general require jurisdiction in exchange for the [the right to do busi- ness in the state.” infra diction is, and should be, alive and well. Neither on whether a registration statute provides sufficient notice of its ju- risdictional effect, with critics asserting that inadequate notice is it- self a defect that invalidates general jurisdiction. particular in tablish general jurisdiction over a corporation based solely on registration to do business and appointment of the an agent under a state statute corporation’s lack- ing explicit reference to any jurisdictional implications.” at 638–39; through registration statutes that would render national companies subject to suit anywhere in the United States is contrary to the holding in 162 Tanya J. Monestier argues NYU that garded ANNUAL “registration as express—or cannot even implied—consent SURVEY to fairly personal jurisdic- be OF re- tion.” AMERICAN LAWStates that have not adopted [Vol. registration 73:159 jurisdiction will do so order in to “get around” Daimler the strict due process rule of \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 4 22-MAY-18 10:16 consent as a jurisdictional basis, Goodyear the misconception persists that year general jurisdiction and in no way upsets the doctrinal nings of consent to jurisdiction, which continues to exist as an inde- underpin- pendent and viable means of Goodyear exercising jurisdiction. Rather, in in decision 1952 “Our stating: valid, Co. ately exercised over a foreign corporation suit in the forum.’” 927–28 (2011) (emphasis added); porate consent: corporate registration statutes. form of corporate Understood consent, registration as jurisdiction must then a sur- vive, notwithstanding the holdings in these cases. 40268-nys_73-2 Sheet No. 6 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 6 40268-nys_73-2 40268-nys_73-2 Sheet No. 7 Side A 05/23/2018 07:56:14 L. EC- . 675, (S AVIS and its EV Some 24 L. R U.C. D Daimler note 2, at 1346 LARK ESTATEMENT , 48 R ], the natural next & C supra EWIS Daimler 1971) (stating that corporate . , 19 L Nor do they agree post- NST Holloway v. Wright & Morrissey, 21 I Cases on the question—even AW 20 . L Consol. Dev. Corp. v. Sherritt, Inc., 216 M A with See generally note 2, at 1358 (“Now that plaintiffs will have a have will plaintiffs that (“Now 1358 at 2, note supra Others have held to the contrary. The End of Another Era: Reflections on , , courts addressing the continuing viability 23 note 2, at 1622–24, for a review of cases. in part because New York Business Corporations Law § 44 cmt. a ( supra AWS Daimler Monestier L —were not consistent. Toward a New Equilibrium in Personal Jurisdiction Daimler Knowlton v. Allied Van Lines, Inc., 900 F.2d 1196, 1200 (8th Cir. , Famular v. Whirlpool Corp., No. 16-cv-944, 2017 WL 2470844, at Rockefeller Univ. v. Ligand Pharm., Inc., 581 F. Supp. 2d 461, 467 Ratliff v. Cooper Labs., Inc., 444 F.2d 745, 748 (4th Cir. 1971) (same), see also see Since Siemer v. Learjet Acquisition Corp., 966 F.2d 179, 183 (5th Cir. 1992) 22 and Daimler . Compare See, e.g. and ONFLICT OF and Professor Professor Linda J. Silberman has put it as a question: “Will re- Leonard v. USA Petrol. Corp., 829 F. Supp. 882, 888–89 (S.D. Tex. 1993) 20. Linda J. Silberman, 21. 22. See Benish, 23. 207, 259–60 (2014))). ) C . EV 692 (2015); 692 R § 1301 does not give explicit notice that the registering corporation will be subject to jurisdiction); Taormina v. Thrifty Car Rental, No. 16-cv-3255(VEC), 2016 WL much harder time establishing general jurisdiction over defendants in all but the most obvious of cases, a different ground of jurisdiction center will stage: most that certainly take of corporate registration.”); Monestier, gistration gistration statutes that exact consent to jurisdiction offer an alterna- tive basis for general jurisdiction?” Implications for Judicial Jurisdiction in the United States OND 2018] CONSENT TO JUDICIAL JURISDICTION 163 \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 5 22-MAY-18 10:16 (“[G]iven the constriction of general jurisdiction in [ before Daimler of registration jurisdiction have reached different conclusions. Sev- eral have held that registration jurisdiction no longer meets consti- tutional requirements. consent to general jurisdiction is perfected through registration). *4–5 (S.D.N.Y. June 7, 2017) (refusing to exercise general jurisdiction over a cor- poration under a consent theory, and collecting cases); Minholz v. Lockheed Mar- tin Corp., 227 F. Supp. 3d 249, 264 (N.D.N.Y. 2016) (declining to find consent to jurisdiction after step for plaintiffs is to seek other grounds for general jurisdiction, obvious place to look and . . . is the in a state registration filing most that designates a corporate agent for service of process.” (quoting Charles W. Burke Robertson, “Rocky” Rhodes & Cassandra (S.D.N.Y. 2008) (concluding that defendant’s authorization designation to of do a registered business agent and for service of personal process jurisdiction amounted in to New consent York), to Inc., 739 F.2d 695, 699 (1st Cir. 1984) (finding that respondent had consented to receive to agent an of appointment and registration corporate through jurisdiction juris- general exercise could state the whether decide not did but process of service diction over a claim with no relationship to New Hampshire); 1990) (concluding without resort to minimum contacts analysis that the Minnesota the that analysis contacts minimum to resort without (concluding 1990) registration and service of process statute is a valid basis of general personal juris- diction), F.3d 1286, 1293 (11th Cir. 2000) (declining to find the defendant subject to gen- eral personal jurisdiction based on its appointment of an agent for service of pro- cess), (same), and (holding that registration only potentially subjects a defendant to jurisdiction and that due process requires a minimum subject contacts to analysis a before state’s judicial a power). nonresident is 40268-nys_73-2 Sheet No. 7 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 7 40268-nys_73-2 40268-nys_73-2 Sheet No. 7 Side B 05/23/2018 07:56:14 , Daimler see also Cepec which has 27 25 I argue that , The Supreme 26 . . , we read our state’s note 7 and accompany- Daimler Daimler Pennsylvania Fire Insurance “does not change the law with eliminated any form of general and see supra and Daimler Daimler .”). Goodyear note 2, at 1640–45. No court post- Goodyear , 227 F. Supp. 3d at 264 (“Because New York , the relevant state registration statute -based due process argument, opponents of re- Daimler supra Minholz . Serov v. Kerzner Int’l Resorts, Inc., No. 162184/2015, Daimler Daimler Benish, , 243 U.S. 93, 95 (1917); ex rel See and , Serov Display Works, L.L.C. v. Bartley, 182 F. Supp. 3d 166, 174 (D.N.J. Brown v. Lockheed Martin Corp., 814 F.3d 619, 623 (2d Cir. 2016) Goodyear See See, e.g. Pennsylvania Fire see also Genuine Parts Co. v. Cepec, 137 A.3d 123, 145 n.120 (Del. 2016) (collect- This Article focuses on the primary judicial and academic ob- First, stare decisis weighs heavily in its favor 25. 24. 27. 26. In addition to the respect to personal jurisdiction based on consent” and exercising jurisdiction over York); New in business do to registered were they because corporation defendant a see also ing cases). ments that the defendant corporation was not operating continuously or systemati- cally); Bailen v. Air & Liquid Sys. Corp., No. 190318/12, 2014 WL 3885949, at *4 (N.Y. Sup. Ct. Aug. 5, 2014) (stating that jurisdiction based on “doing business”). 2016 WL 4083725, at *4–5 (N.Y. Sup. Ct. July 26, 2016) (holding that registration argu- precluded and jurisdiction general to consent was York New in business do to jections to registration jurisdiction: those founded due on process, notions as elaborated of in (holding that Connecticut registration statute did not authorize exercise eral of jurisdiction over foreign corporation and declining to answer whether general gen- jurisdiction by registration would violate the Due Process Clause); 7392214, at *6–7 (S.D.N.Y. Dec. 21, 2016) (refusing to subject a registered corpo- ration to general personal jurisdiction cases); under a consent theory, and 2016) collecting (jurisdiction not acquired pursuant to the because New the Jersey statute does registration not statute “expressly discuss consent or general Norex Petroleum Ltd. v. Blavatnik, No. 650591/2011, 2015 WL 5057693, at *20–21jurisdiction”); (N.Y. Sup. Ct. Aug. 25, 2015) (stating that 164 courts have declined to reach the issue NYU because, as interpreted light ANNUALin of SURVEY OF AMERICAN LAW [Vol. 73:159 \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 6 22-MAY-18 10:16 gistration statutes have argued that they impose an unconstitutional condition on foreign corporations. has so held, however, and some of these concerns are discussed in Section III.B.1. Court endorsed the exercise of general jurisdiction based on regis- tration statutes almost a century ago in Co. of Philadelphia v. Gold Issue Mining & Milling Co. the case for the stronger than these commentators constitutionality and courts have allowed. of registration statutes is far did not authorize the exercise of general jurisdiction. Business Corporations Law § 1301 is absent an explicit indication that registration subjects a registrant to general jurisdiction in New personal jurisdiction York, based on an registration exercise alone would of be counter general to the princi- ples of due process articulated in ing text. 137 A.3d at 148 (“In light of the process U.S. limits Supreme on general Court’s jurisdiction in clarification of the due- registration statutes as providing a means for service of process and not as confer- ring general jurisdiction.”); 40268-nys_73-2 Sheet No. 7 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 7 40268-nys_73-2 40268-nys_73-2 Sheet No. 8 Side A 05/23/2018 07:56:14 Id. infra nor Penn- (which I Pennsylvania Goodyear Rejection of registration Pennsylvania Pennsylvania Fire 32 The Supreme Court has ac- 30 State Oil Co. v. Khan, 522 U.S. 3, 20 As noted, neither ,Therapeu- Acorda (1997))); 3 U.S. 522 According to some contemporary 28 31 see also vacated , 243 U.S. at 96 (distinguishing implied consent, notes 148–65 and surrounding discussion. see also infra is based on the respect for the defendant’s consent to Pennsylvania Fire Ins. Corp. of Ir., Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. Rodriguez de Quijas v. Shearson/Am. Express, Inc., 490 U.S. 477, 484 Int’l Shoe Co. v. Washington, 326 U.S. 310, 319 (1945); Neirbo Co. v. J. McIntyre Mach., Ltd. v. Nicastro. 564 U.S. 873 (2011); discussion Woods v. Interstate Realty Co., 337 U.S. 535, 536 n.1 (1949) (a federal even suggests that registration-based jurisdiction is invalid. See See See See cf. The second and related reason is respect for consent: Section III.B.2. 28. 32. 29. 30. See 31. ] line of Supreme Court authority, we are bound to follow it.”). 29 sylvania Fire the exercise of jurisdiction over it. 2018] never been overruled. Rather, the Court has endorsed registration jurisdiction in subsequent cases. CONSENT TO JUDICIAL JURISDICTION 165 \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 7 22-MAY-18 10:16 cepted consent as a basis of jurisdiction in any number of situations in which the incentives to consent was explicit or implicit. consent were powerful—whether the Justices, all exercise of jurisdiction depends on the explicit or plicit consent im- effected by the defendant. jurisdiction would undermine the important role of consent as an accepted jurisdictional basis. Arguments that foreign corporations seeking to operate in registration states have no choice but to regis- ter and accept the jurisdictional consequences inaccurately ignore the free choice corporations exercise in practice. Daimler Unless the Supreme Court itself overrules argue it should not) it is inappropriate for the lower so. courts to do of consent to obtain jurisdiction over the Part III; foreign corporation); discussion Bethlehem Shipbuilding Corp., 308 U.S. 165, 174–75 (1939) (affirming the effect court in Mississippi dismissed an action brought by a Tennessee cause corporation it had be- failed to comply with a Mississippi law that requires registration condition as of a bringing suit and doing business in the state). concurring) (“Unless the Supreme Court or Congress overrules [the Fire which would not be sufficient to obtain jurisdiction). “But when a power actually is conferred by a document, the party takes the risk of the interpretation that may be put upon it by the courts. The execution was the defendant’s voluntary act.” 694, 703 (1982); infra (1989) (“If a precedent of this Court has direct application in a case, yet appears to appears yet case, a in application direct has Court this of precedent a (“If (1989) rest on reasons rejected in some should follow the case which directly controls, leaving to this Court the prerogative other line of decisions, the Court of of overruling Appeals its own decisions.”); tics, Inc. v. Mylan Pharm., Inc., 817 F.3d 755, 764 (Fed. Cir. 2016) (O’Malley, J., (1997) (stating that even if a Supreme Court precedent pre- “Court’s the remains it foundations,” moth-eaten “wobbly, upon rests and ties” contains many “infirmi- rogative alone to overrule one of its precedents.” (quoting Khan v. State Oil Co., 1996), Cir. (7th 1363 1358, F.3d 93 40268-nys_73-2 Sheet No. 8 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 8 40268-nys_73-2 40268-nys_73-2 Sheet No. 8 Side B 05/23/2018 07:56:14 34 . 33 See infra because Daimler 38 36 Ironically, incorporation by no 35 Further, these statutes provide a fo- 37 § 304(a) (McKinney 2018) provides: “The secretary Part II. Part II. AW J. McIntyre Machinery, Ltd. v. Nicastro . L infra infra ORP . C US Daimler, AG v. Bauman, 571 U.S. 117, 137 (2014) (holding that a cor- discussion discussion N.Y. B See See See See id. In addition, it is important to keep sight of the reason registra- Corporations Corporations have agency. They can and do decide whether or Third, it would be inconsistent to strike down jurisdiction 33. 36. 34. 37. 38. J. McIntyre Mach., Ltd. v. Nicastro. 564 U.S. 873 (2011). 35. As with its registration statute, incorporation in New York, for ex- note 51. locally incorporated entities. based on registration while simultaneously accepting incorporation the as one state of the two of places in which the corporation is “at home” and subject to general jurisdiction as held in tion statutes exist. States enacted them in large part wanted because to they keep foreign corporations on a level playing field with not to conduct business in a particular legal forum because disadvantages of such various as taxes, other breadth of jurisdiction restrictions, generally. They or may decide even not to the do busi- ness in a state that requires acceptance of general jurisdiction, they may decide to limit the breadth of business so that not require the registration, state or they does may decide not to register despite the closing of the state’s court until they decide it is desirable. 166 NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:159 \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 8 22-MAY-18 10:16 ample, requires appointment of the secretary of state as for service of an process, which is regarded agent as consent to general juris- diction by the courts of New York. means indicates that the corporation has any other activities in the state, whereas only a corporation that has state would active comply with business its registration in requirement. that rum for aggrieved citizens who otherwise have rum—or no convenient perhaps fo- no forum against a foreign at defendant who caused all—inthem an injury. Professor which Arthur R. Miller pointed to out the impossibility for an seek injured work- recourse man to bring an action against the manufacturer of defective machine in the allegedly of state shall be the agent foreign of corporation upon every whom process domestic against the corporation corporation may and be served.” every § authorized 304(b) provides: “No domestic or foreign corporation may be formed or author- ized to do business in this state . application for authority it designates the secretary of . state as such agent.” . unless in its certificate of incorporation or it was out of jurisdictional reach in New Jersey where the accident poration’s place “paradig[m] . . of . bases for general jurisdiction.” (quoting Goodyear Dunlap incorporation Tires Operation, S.A. v. Brown, 564 and U.S. 915, 924 (2011))). principal place of business are 40268-nys_73-2 Sheet No. 8 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 8 40268-nys_73-2 40268-nys_73-2 Sheet No. 9 Side A 05/23/2018 07:56:14 286, . EV Daimler 41 Consider a 43 The availability N.Y.U. L. R 44 Many other coun- , 88 42 12 n.36 (Oscar G. Chase & ONTEXT C In concluding his examination . OMPARATIVE His prescience was evident when C 40 , which “suggests[s] a possible narrowing of Simplified Pleading, Meaningful Days in Court, and Trials on ITIGATION IN L Goodyear He noted that on the same day, the Supreme Court IVIL 39 Piper Aircraft Co. v. Reyno, 454 U.S. 235, 252 n.18 (1981) (describing C at 347 n.222. at 353. at 348. Id. Id. Id. See See Critics of registration jurisdiction inadequately address the pur- the address inadequately jurisdiction registration of Critics 39. Arthur R. Miller, 40. 41. 42. 44. 43. of personal jurisdiction, Professor Miller concluded: “What’s next? A sign on the courthouse door proclaiming, ‘Closed’?” jurisdiction, a state resident may find that the only forum available for redress absent registration jurisdiction is very inconvenient no forum or at all, as Professor Miller has argued. pose these statutes serve. Given the limitations on the fora that are available to potential plaintiffs under the current law of personal itself was decided a few years later also decided [general jurisdiction].” the Merits: Reflections on the Deformation of Federal Procedure 2018]happened. CONSENT TO JUDICIAL JURISDICTION 167 \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 9 22-MAY-18 10:16 Helen Hershkoff eds., 2nd ed. 2017) (“The statistical data confirm year after year the deterioration of the Italian civil process, and the failure sures’ enacted by of the legislator almost every the year, which demonstrates, ‘urgent in the end, mea- the lack of an organic coherent reform project. The Annual Report on the Admin- istration of Justice by the President of the Court of Cassation, indicates an average delay of 358, 437, and 1051 days respectively for proceedings before the Justices of the Peace, the tribunals and the courts of appeal, while a Court proceeding of before Cassation the takes as long as an average of 1293 days.”). New Yorker who is injured abroad by “does business” in a New York but foreign has its place of corporation incorporation and that principal place of business in the Rome. If jurisdiction that entity has registered and of designated an agent in the New injury—say, York, the plaintiff could obtain jurisdiction over it not, in an the Italian court state. will be If the only choice. Unfortunately, that is close to no choice at all, as litigation in the Italian courts is so noto- riously subject to delays that justice is unavailable. 347–53 (2013). of registration-based jurisdiction can in some states provide a rea- sonable forum. Whether a nondomiciliary or state should nonresident also be protected of by registration jurisdiction is the a more tries have litigation procedures that are unfair to complainants, as compared to those of American rules of procedure. more extensive discovery). procedural benefits of American courts, including jury trials, contingent fees, and 40268-nys_73-2 Sheet No. 9 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 9 40268-nys_73-2 40268-nys_73-2 Sheet No. 9 Side B 05/23/2018 07:56:14 610, 666 . EV and would 49 . L. R ARV 46 H Section 1301 of New While New York pro- , 101 48 47 II. § 1301 (McKinney 2018). AW The Myth of General Jurisdiction As Professor Mary Twitchell observed with re- . L 45 ORP .”). . C US Brown v. Lockheed Martin Corp., 814 F.3d 619, 640 (2d Cir. 2016) NEW YORK’S REGISTRATION REQUIREMENT Daimler N.Y. B See Id. In stating its case for the continuing validity of registration stat- New York requires all foreign corporations that “do business” The requirements to obtain authorization, which are set forth 45. 48. 49. § 1304. 47. 46. Mary Twitchell, eign corporation may be authorized to do in this state any busi- any state this in do to authorized be may corporation eign ness which may be done lawfully corporation, in to the extent that it is this authorized to do such busi- state by a domestic ness in the jurisdiction business. of its incorporation, but no other A foreign corporation shall not do business in this state until it has been authorized to do so as provided in this article. A for- provides a convenient vehicle because of its importance as a hub of global commerce and because it is one of the states that treats regis- tration as consent to general jurisdiction. utes, this Article looks through the lens of New York law. New York 168 difficult question. NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:159 \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 10 22-MAY-18 10:16 gard gard to general jurisdiction as a whole, the “[C]areful application forum of non utes[ conveniens ] will enable courts to doctrine avoid unfair results.” and venue transfer stat- (1988) (citations omitted). vides a representative example for present purposes, none arguments herein is specific of to that state. For simplicity, the this Article though statute, registration a as law relevant York’s New to refer will by its terms it speaks of “authorization.” in the state to obtain authorization to do so. in section 1304, are mostly a matter of description York Business Corporation Law provides: seem unlikely to raise any controversy except when it comes to juris- to comes it when except controversy any raise to unlikely seem diction. The corporation seeking authorization must designate the New York secretary of state “as its agent upon whom process against it may be served and the post office address within or without this state to which the secretary of state shall mail a copy of any process (“Were the Connecticut statute drafted such that it con- be would we jurisdiction, general to consent to corporations foreign requiring could be fairly construed as fronted with a more difficult constitutional question about the validity of such con- sent after 40268-nys_73-2 Sheet No. 9 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 9 40268-nys_73-2 40268-nys_73-2 Sheet No. 10 Side A 05/23/2018 07:56:14 see In addition to section 53 52 Mahar v. Harrington Park Villa See also This designation has been held to 50 § 305(a) (“In addition to such designation of the see also The goal of sections 1301 and 1312 and their 54 51 Brown v. Lockheed Martin Corp., 814 F.3d 619, 640 (2d Cir. 2016) See The prohibition, however, can be overcome if the corporation Section 1312 incentivizes foreign corporations “doing busi- 51. 50. § 1304(a)(6); 52. § 1312. 53. Beer v. F.W. Myers & Co., 159 A.D.2d 943, 943 (N.Y. App. Div. 1990); 54. § 1303. Such actions are apparently very seldom brought, if ever. None Tri-Terminal Corp. v. CITC Indus., Inc., 432 N.Y.S.2d 184, 185 (App. Div. ized to do business in this state and it has paid to the state statute, related any or law tax the all under imposed taxes and fees as defined in section eighteen hundred of such law, as well as penalties and interest charges related thereto, accrued against the corporation. This prohibition shall apply to any successor in interest of such foreign corporation. (a) A foreign corporation doing business in this state without authority shall not maintain any action or special proceeding in this state unless and until such corporation has been author- secretary of state, every domestic corporation or authorized may foreign corporation designate a registered agent in this corporation state may be upon served.”). whom process against such obtains authorization during the litigation. ness” in New York to obtain authorization by restricting nonregis- trants from instituting actions in New York’s courts. It provides: 2018] against it served upon him.” CONSENT TO JUDICIAL JURISDICTION 169 \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 11 22-MAY-18 10:16 1312, the requirement of authorization is enforceable by the attor- ney general of New York, who “may bring foreign an corporation action from doing to in restrain this state a without authority any business for the doing of which it is required to this be state authorized in . . . .” confer confer general jurisdiction over the corporation New in York. the courts of State.”). also 1980) (remedy for failure to register is not dismissal of complaint but conditional dismissal or stay, authority). thus giving plaintiff opportunity to are reported in Thomson Reuters Westlaw. obtain the Sites, 204 N.Y. requisite 231, 234 (1912) (referring to a prior iteration of section 1301 to (“The registration statute in the state of New York has been definitively construed to accomplish that end, and legislation has been introduced to ratify that construc- tion of the statute.”); Steuben Foods, Inc. v. Oystar Grp., No. 10-CV-780S, 2013 WL 2105894, at *3 (W.D.N.Y. May 14, 2013) (“For courts have more determined that than general sixty jurisdiction may years, be asserted New over York a corpora- tion solely on the basis that it has registered to do business in the forum.”); Rocke- feller Univ. v. Ligand Pharm., (“[C]ases Inc., . . 581 . have F. found Supp. [general] personal 2d jurisdiction where maintained 461, an a active defendant authorization 465 to has do business (S.D.N.Y. on file with the 2008) Department of 40268-nys_73-2 Sheet No. 10 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 10 40268-nys_73-2 40268-nys_73-2 Sheet No. 10 Side B 05/23/2018 07:56:14 Accord- Airtran N.Y., 55 See Incentivizing 56 Section 1301 does not provide a 57 Given that the filing of an application for authorization under 55. § 402(a)(7). 56.7B, Book NY, of Laws Cons Commentaries, Practice Alexander, C. Vincent 57. The term “doing business” is used in New York in several other contexts, Ct. Cl. 1964) (“Ample statutory authority exists to permit the Attorney General to bring an action against a non-qualifying corporation to restrain it from exercising corporate rights or privileged not granted to it.”). CPLR § C301:6(c) Corporate registration. none of which are interpreted in the same way as section 1301. find that “[t]he only penalty which the general corporation itself prescribes for a disregard of the provisions of this section is a disability to sue upon such a contract in the courts of New York.”); Wm. G. Roe & Co. v. State, 43 Misc. 2d 417, 422 (N.Y. 170 predecessors is to ensure that foreign corporations conducting reg- NYUdomes- as footing legal same the on stand York New in business ular ANNUAL SURVEY OFtic AMERICAN ones. LAW Part of putting footing” as the a foreign [Vol. domestic 73:159 corporation corporation is on equalizing actions. All its the domestic availability corporations—those incorporated “same to within the state—are subject to general jurisdiction in New York (even if they have no other activities there) because their certificate of incorpo- ration must designate the secretary of the state as an agent “upon whom process against the corporation may be served.” \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 12 22-MAY-18 10:16 L.L.C. v. Midwest Air Grp., Inc., 844 N.Y.S.2d 233, 237 (App. Div. 2007) (“Section 1312(a), which denies an unauthorized foreign corporation “doing business” in ingly, “[i]t appears well settled that a domestic corporation is sub- ject to ‘general’ jurisdiction in New York . . . .” in the state, the interpretation of foreign the corporation latter considering term activities is in New critical York. for The tion a ques- whether a foreign corporation is “doing business” for the pur- dismiss to moves defendant a when only arises 1301 section of poses an action on the ground that the plaintiff is a foreign corporation “doing business” without authorization “maintain” an action and because of section therefore 1312. The issue may thus of whether the fact plaintiff not has is sufficient activities in the state to be deemed “doing business” there. foreign corporations to consent to general jurisdiction eliminates arguably unfair advantages that foreign corporations over would domestic have ones. In addition to over imposing the corporation, general the designation jurisdiction of the secretary of state pro- vides an official on whom process may be served if the defendant is difficult to find. This could be a with particular a nonregistered danger foreign corporation. when dealing section 1304 will submit the applicant to general jurisdiction, and given that a failure to register will from prevent “maintaining an a action” in foreign New York corporation if it is “doing business” 40268-nys_73-2 Sheet No. 10 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 10 40268-nys_73-2 40268-nys_73-2 Sheet No. 11 Side A 05/23/2018 07:56:14 and (2) must show that show must (2) and 59 In the absence of an addi- 58 Storwal Int’l, Inc. v. Thom Rock Realty Rock Thom v. Inc. Int’l, Storwal see also see Highfill, Inc. v. Bruce & Iris, Inc., 855 N.Y.S.2d see also , 855 N.Y.S.2d at 637 (internal citation omitted). Maintenance of an office or showroom in New York , 844 N.Y.S.2d at 238; at N.Y.S.2d 844 , 61 The burden is high because “a lesser showing might Netherlands Shipmortgage Corp. v. Madias, 717 F.2d 731, 735–41 (2d 60 See Highfill, Inc. Airtran (3) Maintaining bank accounts. (4) Maintaining offices or agencies only for the transfer, exchange and regis- tration of its securities, or appointing and maintaining trustees or depositaries with relation to its securities.” 59. 58. “Without excluding other activities which may not constitute doing busi- (1) Maintaining or defending any action or proceeding, whether judicial, ad- ministrative, arbitrative or otherwise, or effecting settlement settlement of thereof claims or or disputes. the (2) Holding meetings of its directors or its shareholders. 60. 61. N.Y. Bus. Corp. Law § 1301 (McKinney 2018). this state capacity to sue here, employs a heightened fashioned “doing specifically business” to standard, avoid unconstitutional interference with interstate merce com- under the Commerce Clause.”). ness in this state, a foreign corporation shall not be considered to be doing ness busi- in this state, for the purposes of this chapter, by reason of carrying on in this state any one or more of the following activities: 2018] definition, although subsection (b) describes four activities that will not alone constitute “doing business.” CONSENT TO JUDICIAL JURISDICTION 171 \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 13 22-MAY-18 10:16 infringe on Congress’s constitutional power to regulate commerce.” interstate tional statutory definition, the courts principles: A defendant seeking to have dismiss an action on the ground established two basic that the plaintiff may not maintain the suit (1) has business,” “doing the is plaintiff the that proof burden of business.” “the plaintiff’s business activities in New York were not simply ‘cas- ual or occasional,’ but rather were ‘systematic and regular,’ state intra- in character, and essential to the plaintiff’s corporate Co., 784 F. Supp. 1141, 1144 (S.D.N.Y. 1992) (“This standard is ‘doing business’ standard under New York’s long-arm stricter statute. Because of the possi- than the Cir. 1983) (citing cases); (finding that plaintiff Chinese company did not though New do York was business the “nerve in center” and New principal place York of business even because majority of plaintiff’s business dealings were international); Penn Collieries Co. v. done was anything that appear not did (“It 1905) (N.Y. 936 935, N.E. 75 McKeever, here by the corporation beyond the mere maintenance of an office for [consign- ment of some merchandise manufactured elsewhere.]”). 635, 636–38 (App. Div. 2008) (dismissing breach of contract claim Louisiana corporation brought because the by plaintiff was a doing business regularly and con- tinuously in New York but did not register); Dukes, Posadas 757 F. Supp. de 297, 301–02 Mexico, (S.D.N.Y. 1991) (finding S.A. that plaintiff Posadas, de a C.V. v. Mexican corporation operating hotels there was not doing business in New even York though it had an office in New York and had New contracted York with corporations independent for its hotel business); New Asia Enters. Ltd. Ltd., v. No. Fabrique, 13 Civ. 5271(JFK), 2014 WL 3950901, at *6–7 (S.D.N.Y. Aug. 13, 2014) 40268-nys_73-2 Sheet No. 11 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 11 40268-nys_73-2 40268-nys_73-2 Sheet No. 11 Side B 05/23/2018 07:56:14 See 64 These 63 , 2015 WL 150756 J. McIntyre v. Nicas- This involves essen- and 65 , 784 F. Supp. at 1145 (foreign parent The (Theoretical) Future of Personal Jurisdic- , 514 N.Y.S.2d 96 (App. Div. 1987) (reversing , 14 A.D.2d 866 (1961) (plaintiff allowed to main- to allowed (plaintiff (1961) 866 A.D.2d 14 , rev’d in part on other grounds see also Storwal aff’d Goodyear Dunlop Tires v. Brown 617, 621 (2012). . note 62. EV Nor is a foreign corporation deemed to do business in Audemars Piguet Holding S.A. v. Swiss Watch Int’l, Inc., 46 F. Supp. 3d 62 See supra See Alicanto, S.A. v. Woolverton See S.C. L. R Or the corporation may instead decide to conduct activities in Corporations enter new states to earn profit and expand their The actual application of New York’s registration system shows 65. 62. 63. 64. Lea Brilmayer & Matthew Smith, Stafford-Higgins Indus., Inc. v. Gaytone Fabrics, Inc., 300 F.Supp. 65, 67 the state that meet its needs but fall New York short as of that term “doing has been business” interpreted. in bility of an unconstitutional infringement of interstate commerce, a higher level of intrastate activity must be shown to trigger § 1312.”). 172 does not, by itself, indicate that a corporation is “doing business” in NYUthe ANNUALstate. SURVEY OF AMERICAN LAW [Vol. 73:159 \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 14 22-MAY-18 10:16 New York through its wholly owned New York subsidiary. tially no risk because noncompliance with the registration statute trial court finding that plaintiff corporation was doing business in New York—even though plaintiff had an office, bank York—because it had only made a few purchases in New York which were meant to accounts, and employed a lawyer be in used New internationally); James Ct.), (Sup. 355 354, N.Y.S.2d Talcott, Inc. v. its had but York, New in showroom and office an had assignor its although suit tain J.J. Delaney Carpet main Co., offices in Georgia 213 where orders accepted and products manufactured). also (S.D.N.Y. 1969) (“The maintenance of an office within the state does not prevent the corporation from bringing suit, even if coupled with the employment of solici- tors to transmit orders obtained here to the home office for acceptance, and even if the corporation’s name appears on the door.”). state and arrange its affairs accordingly. It may decide to carry no on business in New York at all for this and taxes, other regulations reasons, of such its as business, or a variety of other goals. business, just as individuals travel to, because or interact it with, is new personally, states socially, People have or motives that need professionally not (and generally advantageous. do not) involve deliberate manifestations of assent to the states’ coercive power. rulings place meaningful limitations on the registration reach statute. of New York’s that foreign corporations considering commercial activities in New York have several reasonable could simply elect choices. to avoid conducting Foremost, substantial activities in a the corporation (S.D.N.Y. Jan. 12, 2015) (finding that a subsidiary’s doing business in New York is not imputed to Swiss parent); corporation cannot be subsidiary). deemed to be doing business through a New York tro, 63 255 285–86 (S.D.N.Y. 2014), tion: Issues Left Open by 40268-nys_73-2 Sheet No. 11 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 11 40268-nys_73-2 40268-nys_73-2 Sheet No. 12 Side A 05/23/2018 07:56:14 69 the 68 , 70 Daimler Importantly, failing 66 allow foreign corporations “to struc- do Part V. infra note 53. note 63. discussion at 762 (quoting Burger King Co. v. Rudzewicz, 471 U.S. 462, 472 67 See supra See supra Id. See A corporation considering conducting business in New York The variety of strategies that a foreign corporation can reason- 66. 67. 68. Daimler AG v. Bauman, 571 U.S. 117, 69. 139 (2014). 70. could easily learn of the through competent registration counsel. That statute becoming informed and may its entail consultation with counsel hardly suggests unfairness to the corpora- legal effect tion. Reasonable corporate leaders would not proceed without due diligence, including receiving legal advice from both New York and its “home” place of business. Nor is the lack of explicit notice of the jurisdictional effect of registration problematic. The incorporation of an entity in New York has the same effect on jurisdiction and no explicit warning is provided in the incorporation statute. ably follow make it obvious that the decision to register and consent and register to decision the that obvious it make follow ably to general jurisdiction is freely made. Unlike the plight of the “out- of-state defendants” that worried Justice Ginsburg in 2018] becomes an issue only if the corporation brings an action York and in the defendant raises the New issue. Even if the plaintiff is held CONSENT TO JUDICIAL JURISDICTIONto be “doing business” and is momentarily register at once and continue with the litigation, or noncompliant, discontinue the it may action and perhaps pursue it in another state. 173 \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 15 22-MAY-18 10:16 New York registration rules ple expedient of including an arbitration clause in its contracts with contracts its in clause arbitration an including of expedient ple New York entities. Alternatively, a corporation reason, must conduct that, activity within New York that rises to the for level whatever of “doing business” and that also wants access to the courts can set up a subsidiary to register and shielding carry the out parent from these being activities, subject to thereby general jurisdiction the in state. to register does not carry true closure penalties, the extent the To state. the in operating from banned being in the sense of fines or of the state’s courts to the nonregistrant poses an impediment, that corporation may avoid this issue to a substantial degree by the sim- where that conduct will and will not render them liable to suit.” ture their primary conduct with some minimum assurance as to (1985)). 40268-nys_73-2 Sheet No. 12 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 12 40268-nys_73-2 40268-nys_73-2 Sheet No. 12 Side B 05/23/2018 07:56:14 AW OF The 75 L HE T and the obliga- the and , the first case to 76 Court recognized In today’s parlance, , which held that an 74 Pennoyer decision is taken to mark both The Court found support in 72 Pennoyer v. Neff Lafayette III. , 59 U.S. at 408. 641 (1965) (“The CONSENT CONSENT TO JURISDICTION Arthur T. Von Mehren & Donald T. Trautman, thus established that consent was a valid basis for Lafayette Insurance Co. v. French Court, the implied jurisdiction was justified (and con- A. The Development of Consent by Registration ROBLEMS see also P at 408. at 407. ; . at 735. Under Ohio law, a foreign corporation was deemed to Lafayette Id Lafayette Ins, Co. Id. Id. Id. 73 77 Consent Consent to the exercise of personal jurisdiction has long been Lafayette 71. Pennoyer v. Neff, 95 U.S. 714, 733 (1877) (exceptions to the rule that 72. 77. 74. 73. Lafayette Ins. Co. v. French, 59 U.S. 404, 407 (1855). 75. 76. More to the point of this Article, the 71 ULTISTATE recognized recognized as valid and binding. In jurisdiction may not be obtained against a non-resident that include mode of “cases service may in be which considered to have been assented to in advance”) M Indiana corporation was subject to process jurisdiction had been in served Ohio on an because agent doing behalf. business there on its 174 NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:159 \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 16 22-MAY-18 10:16 the jurisdiction consented to was limited to specific jurisdiction. For jurisdiction. specific to limited was to consented jurisdiction the the stitutional) because the Indiana corporation could not transact bus- iness in Ohio without its permission, “express or implied.” have assented to service on such agents for suits concerning “con- tracts made and to be performed in Ohio.” the firm establishment of the proposition that a corporation can, justi- theoretical then-accepted the articulate to and abroad sued be in circumstances, appropriate fication for this result. From this point on the problem became when—no longer whether—a foreign corporation can be made subject to local up)). process.” (cleaned Court found “nothing in this provision either unreasonable self, or in conflict with any principle of public law” in it- that states could require foreign “partnerships and associations” to designate agents, including public officers, as proper persons upon whom to serve process, a power that was not impaired by the adop- tion of the Fourteenth Amendment. not found in the state despite its principal holding that state sover- eignty limited the jurisdiction of each state to persons found within it. address jurisdiction over persons after the adoption teenth Amendment, the Court affirmed consent as one of the bases of the Four- on which a court could obtain jurisdiction over a person who was an 1855 case, tion to attend court in such cases “is well law.” founded in morals and 40268-nys_73-2 Sheet No. 12 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 12 40268-nys_73-2 40268-nys_73-2 Sheet No. 13 Side A 05/23/2018 07:56:14 80 Ex . L. EX T , 66 Simon v. Southern Railway In In )). 81 Old Wayne Mutual Life Association v. Lafayette Further, the implicit consent was , 190 U.S. at 158–59. 83 A General Look at General Jurisdiction Citing 84 79 Subsequent cases expanded state power to find implicit , Mut. Reserve Fund Life Ass’n v. Phelps, 190 U.S. 147, 158–59 (1903) Lea Brilmayer et al., Smolik v. Phila. & Reading Coal & Iron Co., 222 F. 148, 150 (S.D.N.Y. 78 at 130. The statute relied upon provided: “Whenever any such corpora- such any “Whenever provided: upon relied statute The 130. at Id. Id. Mut. Reserve Fund Life Ass’n See E.g. See the Court recognized that “[s]ubject to exceptions, not mate- Although Although the power of states to exclude foreign corporations Schollenberger, 96 U.S. 369, 376 (1877) (finding that service on a designated 82. Simon v. S. Ry. Co., 236 U.S. 115, 130 (1915). 83. 84. 81. 78. 79. 80. 82 723, 759 (1988) (“Furthermore, the old notion that a state could entirely , . EV R from doing business within their borders was later eliminated, exclude corporations or condition their entry cause corporations upon were state-created legal entities consent that could not operate to beyond jurisdiction be- Tel. Union W. v. Co. Tel. Pensacola (citing ago.” long eroded borders sovereign’s a Co., 96 U.S. 1, 10–12 (1877))). 2018] jurisdiction, even if the consent was implicit, so long as state law so provided. CONSENT TO JUDICIAL JURISDICTION 175 state power to base jurisdiction on jurisdiction implicit remained valid, corporate at least consent when the claim to was connected to the defendant’s activity in the state. \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 17 22-MAY-18 10:16 found if the corporation “doing business” in the state had failed to appoint another agent. rial here, every state has the undoubted right to provide for service to therein; business doing corporations foreign any upon process of require such companies to name agents upon whom service may be made; and also to provide that in case of the company’s failure to appoint such agent, service, in proper cases, may be made upon an officer designated by law.” consent to serve a government officer in addition to an agent of the corporation. Co. tion shall do any business of any nature in the state without having complied with the requirements of § 1 of this act [which required the designation of an agent], it may be sued for any legal cause of action in any parish of the state where it may do business, and such service of process in such suit may be made upon the secretary of state the same and with the same validity as if such corporation had sonally been served.” per- Louisiana Act No. 54 of 1904 § 2. been in fact an appointment.” (citing 1915) (“[C]onsent to such an appointment must be assumed business, from and that jurisdiction the in personam would be doing acquired, just as of if there had (finding that service on the insurance commissioner of Kentucky parte was valid.); agent in Pennsylvania of a foreign insurance corporation satisfied the requirement of federal law that the defendant be “found” in the district to companies insurance foreign where all required had law Pennsylvania because brought the action was designate an agent for service of process). 40268-nys_73-2 Sheet No. 13 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 13 40268-nys_73-2 40268-nys_73-2 Sheet No. 13 Side B 05/23/2018 07:56:14 The cases, 87 Interna- for the principle that Louisiana’s To be sure, that 90 Simon The consent given by the Judge Hand found “no con- Smolik v. Phila. & Reading Coal & Coal Reading & Phila. v. Smolik 88 91 Old Wayne Mutual. Life see also Old Wayne Mut. Life Ass’n This left open the question whether and , Judge Hand observed, was not a “le- 86 Simon Smolik Critics of registration jurisdiction have over- 92 was endorsed by the Supreme Court in designated an agent for the service of process. , 326 U.S. at 318. however, the Court held in Rather, “actual consent” had been given by the Phila- Smolik , 222 F. at 150–51 (1915). , 236 U.S. at 130 (citing 85 89 , Smolik v. Philadelphia & Reading Coal & Iron Co. 93 . explicitly at 148. at 151. at 148. at 150–51 (“There is no reason that I can see for imposing any limita- Smolik Id. Simon Id. Id. Id. Id. See Int’l Shoe Distinguishing the 87. 88. 85. Old Wayne Mut. Life Ass’n v. McDonough 204 U.S. 8, 18 (1907) (finding 86. 89. 90. 91. 92. 93. tional Shoe Iron Co., 222 F.148, 149–50 (S.D.N.Y. 1915) (“The ground of the decision was that the implied consent of the corporation arising from its doing business within Loui- state.”). the within done business the of out arising actions to limited be must siana looked that that an Indiana Corporation that did business in Pennsylvania was not entitled to enforcement in Indiana because even though the life insurance contract was made in Indiana the insured and the beneficiaries resided in Pennsylvania). “that the statutory consent of a foreign corporation to be sued does not extend to causes of action arising in other states.”); 176McDonough NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:159 \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 18 22-MAY-18 10:16 power power to appoint the secretary without the actual consent of a Vir- ginia corporation was limited to which was not the case there. claims that arose in Louisiana, of doing business.” stitutional objection to a state’s exacting corporations to a any jurisdiction which it consent may please, as a from condition foreign general jurisdiction could be obtained over a foreign corporation that had delphia and Reading Coal and Iron Company. defendant was a Pennsylvania mining corporation sued in New York New in sued corporation mining Pennsylvania a was defendant for damages suffered in Pennsylvania. corporate defendant in gal fiction” as was the case when consent was implied by the doing of business. consent had been given pursuant to a requirement of New York law that corporations “doing business” in the state appoint an agent for state. the within process of service the rate consent to jurisdiction to include claims “upon action” any in cause of The answer was not long in coming. Judge Learned Hand held that the Constitution permitted corpo- tion upon the effect of section 1780 of the New York Code, and as a that result the I find consents covered such actions as these.”). 40268-nys_73-2 Sheet No. 13 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 13 40268-nys_73-2 40268-nys_73-2 Sheet No. 14 Side A 05/23/2018 07:56:14 . , LA F This Smolik , 64 99 decision). Judge Cardozo’s However, the opin- 98 Pennsylvania Fire Charles W. “Rocky” Rhodes, Smolik, see The service on the designated 100 decision and two years after Following 95 Gold Issue, an Arizona corporation, Bagdon 102 Bagdon Bagdon v. Philadelphia & Reading Coal & Iron , 243 U.S. 93 (1917); 97 emphasized the explicit consent made by the , 111 N.E. at 1076. and then explored the free will behind the consent. Bagdon led soon to at 1077. 96 Pennsylvania Fire Insurance Co. of Philadelphia v. Gold Issue at 1075. at 1076. Bagdon Id. Pennsylvania Fire 101 Id. Id. Id. Id. Id. in which the same Pennsylvania corporation was again sued 387, 434–35, 444, 446–47 (2012) (discussing . One year after the Failure to obtain the certificate had a cost: “The penalty is that Smolik 94. Bagdon v. Phila. & Reading Coal & Iron Co., 111 N.E. 1075 95. (N.Y. 1916). 96. 97. 98. 99. 100. 101. 102. 94 EV , however, there are conditions that must be them is a stipulation, to be filed in the office of the secretary of fulfilled. One of state, “designating a person upon whom process may be served within this state.” shall not do business here until from it the has secretary obtained of a state. certificate . . . To obtain such a certificate, the issue of general jurisdiction by consent reached the Supreme L. R defendant opinion in Court in Mining & Milling Co. [the corporation] may not maintain any action in our courts ‘upon any contract made by it in this state, unless the contract before it has procured such certificate.’”the making of in New York, this time by a New Yorker alleging a breach of a con- tract made in Pennsylvania. 2018] CONSENT TO JUDICIAL JURISDICTION 177 \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 19 22-MAY-18 10:16 brought an action in a Missouri court seeking compensation from ion continued, “[t]he business, though unlicensed, is the contract not is not illegal; void; it may be enforced in other all jurisdictions; that is lost is the right to sue in the courts of the state.” Co. New York law, he said, instructed that a foreign corporation agent was held Clause. effective and consistent with the Due Process designated is a true agent. The consent that he shall represent the corporation is a real consent.” “penalty” was considered insufficiently harmful to undermine the consent: “The stipulation is therefore a true contract. The person Nineteenth Century Personal Jurisdiction Doctrine in a Twenty-First Century World 40268-nys_73-2 Sheet No. 14 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 14 40268-nys_73-2 40268-nys_73-2 Sheet No. 14 Side B 05/23/2018 07:56:14 110 Re- 108 The latter which had 104 103 Pennsylvania Fire 107 , the importance of con- The “document” referred to , 184 S.W. at 1004–05 (rejecting the Jurisdiction over Pennsylvania Smolik 109 105 As required by therelevant Missouri , a Pennsylvania court could not, consistent and 112 106 , 243 U.S. at 94. Bagdon McDonough As in and earlier cases in which jurisdiction was held in- 111 Gold Issue Mining & Milling Co. v. Pa. Fire Ins. Co. of Phila., 184 at 103. at 96. at 94. at 95–96 (citing Old Wayne Mut. Life Ass’n v. McDonough, 204 U.S. at 94–95. Id. See Gold Issue Mining & Milling Co. Id. See Id. Id. Id. See Pennsylvania Fire Id. Id. 110. 111. 112. 103. 104. 105. 106. 107. 108. 109. sent was underscored by the Supreme Court’s distinction between Pennsylvania Fire valid because the defendants in those cases “had not appointed the agent as required by statute.” Arizona corporation’s defense that the court did not acquire jurisdiction over de- fendant because neither party was a resident of Missouri and the action accrued in Colorado). S.W. 999, 1000–01 (Mo. 1916). with Missouri. Under Missouri law, that consent authorized the exercise of diction juris- over the corporation even though it had no other contacts 178 Pennsylvania Fire, a Pennsylvania insurance company, NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:159 \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 20 22-MAY-18 10:16 deemed personal service upon the company so have long any as liabilities it outstanding should in the state.” Fire was based on service filed with the superintendent of the Mis- department. insurance souri statute, the defendant had obtained a license to do business in Mis- souri and “had filed with the superintendent . . . a power of attor- ney consenting that service upon the superintendent should be insured insured a building owned by Gold Issue in Colorado. claimed that the insurer refused to indemnify it after the property had been destroyed by lightning. argued that such jurisdiction would violate the Fourteenth Amend- ment unless the claim was based on “Missouri contracts.” jecting that limitation, the Supreme Court defendant’s relied directly consent, on stating: the “But when a ferred by power a document, actually the party is executing con- it takes interpretation that may be the put upon it by the courts. The execution risk of the was the defendant’s voluntary act.” was the power of attorney in which Pennsylvania consented to ceptance of service on the Missouri ac- superintendent of insurance. 8, 22–23 (1907)). Under with the Due Process Clause of the Fourteenth over Amendment, an obtain Indiana jurisdiction corporation when the plaintiff Insurance had Commissioner served when process only the on defendant the had not designated the commis- 40268-nys_73-2 Sheet No. 14 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 14 40268-nys_73-2 40268-nys_73-2 Sheet No. 15 Side A 05/23/2018 07:56:14 The obvious 118 .” later described by , the Court said, 115 , A plaintiff could, however, ob- Pennsylvania Fire. Id. There was no need for the , the Supreme Court held that 117 and the implication is that where Neirbo Neirbo Co. v. Bethlehem Shipbuilding Pennsylvania Pennsylvania Fire 119 even though no consent to be sued or authorization , 243 U.S. at 95. International Shoe , 326 U.S. at 320. Pennsylvania Fire In International Shoe Co. v. Washington v. Co. Shoe International 116 at 175. at 317 (emphasis added). Id. Int’l Shoe Id. Pennsylvania Fire There, the Supreme Court accepted registration jurisdic- 114 113 The The recognition of consent as the basis of general jurisdiction The constitutionality of registration jurisdiction was implicitly The continued constitutionality of registration-based jurisdic- 113. Neirbo Co. v. Bethlehem Shipbuilding Corp., 308 114. U.S. 165, 174–75 115. Int’l Shoe Co. v. Washington, 326 U.S. 310 (1945). 116. Daimler AG v. Bauman, 571 U.S. 117, 126 (2014). 117. 118. 119. accepted in accepted by registration was followed in Corp. the International Shoe Company was subject to jurisdiction in the State of Washington because the claim at issue arose from the cor- poration’s activities in that state. sioner, or any other Pennsylvanian, as an agent, and the business from which the claim arose was not transacted in Pennsylvania. 2018] CONSENT TO JUDICIAL JURISDICTION 179 \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 21 22-MAY-18 10:16 tion over the Bethlehem Shipbuilding Corporation, a Delaware cor- poration. Citing and quoting through Justice Frankfurter: “A statute calling for such a tion is constitutional, designa- and the designation of the agent ‘a voluntary act.’” tion in the state. Simon v. S. Ry. Co., 236 U.S. 115, 130–32 (1915) (same). (1939). to an agent to accept service of process has been given consent has been given, jurisdiction is available. tion, therefore, hangs on the validity of Section, the I argue that the Supreme Court’s long acceptance of a very consent. In the next broad understanding of “consent” in the American law of jurisdic- tion ratifies the continuing authority of tain jurisdiction by serving the Commissioner if the claim was based on a transac- Court to directly examine registration jurisdiction was not as based jurisdiction on it. In discussing the concept of ence,” corporate however, “pres- the Court impliedly affirmed the validity of regis- tration by noting that “‘[p]resence’ in the never state been in doubted this when sense has the activities of have not only the been continuous and corporation systematic, but also there give rise to the liabilities sued on, reference is to Justice Ginsburg as the “canonical opinion” in the area of personal jurisdiction. 40268-nys_73-2 Sheet No. 15 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 15 40268-nys_73-2 40268-nys_73-2 Sheet No. 15 Side B 05/23/2018 07:56:14 123 the corpora- the 124 126 at 1379–92. For example, Professor Monestier, while see also id. argues that corporate registration does not 120 note 2, at 1379. 121 B. Consent or Compulsion? Finally, Professor Monestier makes much of the of much makes Monestier Professor Finally, supra 125 notes 57–67. note 53. , Brown v. Lockheed Martin Corp., 814 F.3d 619, 639–41 (2d Cir. at 1379–80. at 1389. Id. Id. See supra Id. See supra See, e.g. Her argument is based on the assertion that “[a]side from note 2, at 1347 (“In this Article, I argue that general jurisdiction based on 122 Some commentators and courts have challenged the validity of 122. 123. 124. 125. 126. 121. Monestier, 120. the consent that underlies general jurisdiction obtained by corpo- rate registration, arguing that it is not a true not be consent treated as and such. should supra registration to do business violates the Due Process Clause, because such registra- tion does not actually amount to ‘consent’ as that term is understood in personal jurisdiction jurisprudence.”); 2016) (suggesting that a state’s jurisdictional power obtained purported consent may be limited by the Due Process Clause, but not reaching the by a corporation’s question); Genuine Parts Co. v. Cepec, 137 A.3d 123, 147 (Del. 2016); Monestier, tion. This statement, ironically, admits that the accept- require would that state a avoiding or corporation entering of choice the does have ance of registration jurisdiction. The choice may or may not be dif- ficult for a corporation—but it is still a choice and the granted, consent, if is not compelled. Further, flexibility of “doing business” as I have shown above: her argument overlooks the 180 NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:159 amount to consent, either express or implied, to general jurisdic- \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 22 22-MAY-18 10:16 registering to do business in the state general and thereby jurisdiction, consenting to a corporation choices: not do business in the state or do business in the state with- really only has out registering one and of face whatever two penalties the law ascribes.” nonregistered corporation as facing “penalties.” Again, New using York example, the only realistic the penalty is the inability to insti- tute an action in the state’s courts if the court finds that the corpo- ration is “doing business” without having registered. And that event, the problem even is readily cured by registration at in that time, rendering the rule hardly a penalty at all. accepting accepting that “[i]t is black letter law that one can consent to per- sonal jurisdiction and thereby waive any protection afforded by the Due Process Clause,” range of activities that do not amount to “doing business” for regis- purposes. tration tion may choose to limit its business in the particular state so that it is not required to register. New York, for example, allows a wide 40268-nys_73-2 Sheet No. 15 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 15 40268-nys_73-2 40268-nys_73-2 Sheet No. 16 Side A 05/23/2018 07:56:14 but his- 130 As she acknowledges, how- In fact, the vast majority of 127 128 131 Obviously, this state of affairs gives corpo- Part IV. 129 note 2, at 1390. note 2, at 1390. note 2, at 1384. infra such as the unreasonable nature of the agree- supra supra supra 132 in Part II. note 5. in the United States.” It also ignores the Supreme Court cases that have , Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585 (1991). 135 1. Incentives to Registration Are Constitutional In fact, however, the Supreme Court has shown scant discussion at 1385–86. In this way, registration jurisdiction and the consent un- at all 133 See Id. See, e.g. See supra Id. See supra 134 The fundamental weakness in the argument that registration Another concern Professor Monestier raises is that defendants Professor Professor Monestier asserts that the choice in this context is 131. 132. Monestier, 133. 134. 135. 128. 129. 130. Monestier, 127. Monestier, jurisdiction is compulsory is that it fails to distinguish compulsion from incentive. The easy claim of “compulsion” ignores the agency that corporations exercise in deciding whether to jurisdiction through registration. accept In fact, the general behavior of corporate entities in New York and elsewhere shows that they have substantial by effected jurisdiction the accept to not or whether decide to room registration. subject to jurisdiction by virtue of registration are not protected by the “contractual policing doctrines” available to parties to a forum selection clause, illusory: illusory: “Since all fifty states have the same laws requiring registra- tion, this ‘option’ really amounts to a corporation simply not doing business consent to jurisdiction. derlying it fall easily within the bounds of free choice and voluntari- ness the Court requires in order to give effect to a defendant’s 2018] CONSENT TO JUDICIAL JURISDICTION 181 \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 23 22-MAY-18 10:16 concern for parties seeking to get out from under a forum selection forum a under from out get to seeking parties for concern clause. that all fifty states could adopt registration jurisdiction, rations a wide range of additional choice—for example, to do sub- stantial business only in those states. Professor Monestier speculates ever, there are states that do not treat registration as imposing gen- eral jurisdiction on the registrant. ment or “‘fraud, power.’” undue influence, or overweening bargaining tory and the interests of the states to attract business make this pos- sibility extremely unlikely. states do not assume it. 40268-nys_73-2 Sheet No. 16 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 16 40268-nys_73-2 40268-nys_73-2 Sheet No. 16 Side B 05/23/2018 07:56:14 The Court held that Carnival Cruise Lines v. Lines Cruise Carnival ) and the “contract” is 141 137 , https//en.wikipedia.org/wiki/ 136 IKIPEDIA Relying on a clause in the cruise W 140 The Supreme Court has validated 138 , 499 U.S. at 592–94. See Jack Benny, The Court opined that a reasonable forum notes 148–178. 142 at 588. The Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972) (“This case, at 593. Plaintiff, a resident of Washington State who was injured See infra See Carnival Cruise Lines Id. Id. Id. 139 . True, it is not always easy to distinguish compulsory agreement 136. 137. Jack Benny (1894–1974) was a famous comedian on radio and television 138. 139. 140. 141. 142. from incentive. We know that a person who gives gunpoint up has his no real wallet choice; at it is not a matter of incentives in any ordinary meaning (unless he is Jack Benny “I’m thinking it over.” in the twentieth century known for his (comedic) cheapness. A Benny favorite skit stopped had by a mugger Benny who does not demands: answer “Your the mugger money repeats or the threat. your Finally, Benny life.” responds, When 182 enforced jurisdiction by consent, even when NYU the defendant’s con- sent ANNUAL was obtained through pressure. SURVEY OF AMERICAN LAW [Vol. 73:159 \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 24 22-MAY-18 10:16 clause . . . of this kind may be permissible for several the reasons: cruise . line has . a special . interest in limiting the fora in which it potentially be subject to suit . . . the salutary effect of dispelling any confusion about where suits brought arising and defended from [and the] the reduced fares reflecting contract the sav- must be while on defendant’s cruise ship off the coast of Mexico brought an action against Carnival Cruise in the Western District of Washington. U.S. District Court for the Jack_Benny#.22Your_money_or_your_life.22, Jack_Benny#.22Your_money_or_your_life.22, [https://perma.cc/8NQR-KBGM]. not enforceable. That said, a bargain between two parties agreeing to a choice of stronger forum than will the be enforceable other. even if one party is ual purchasing the ticket will not have bargaining cruise parity with the line.” the forum agreement was binding and that the action in Washing- ton should be dismissed. sense The dictates that a Court ticket of this admitted kind will be that a form terms contract of “[c]ommon the which are not subject to negotiation, and that an individ- ticket that required all disputes to be litigated in a court located in Florida (where Carnival Cruise had its headquarters) the defendant moved to dismiss the case in Washington. choice-of-forum agreements between contract parties that were not in notably sense, real any in negotiated freely Shute however, involves a freely negotiated tween a German and an American corporation for towage of a vessel from the Gulf international commercial transaction be- of Mexico to the Adriatic Sea.”). 40268-nys_73-2 Sheet No. 16 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 16 40268-nys_73-2 40268-nys_73-2 Sheet No. 17 Side A 05/23/2018 07:56:14 , “The , 841 F. Insurance In the case, 148 exemplifies the 147 Fteja v. Facebook, Inc. Were the plaintiffs “com- AT&T Mobility, L.L.C. v. Concep- 146 , Justice Stevens wrote: “I begin See also And now, in the digital age, even the 144 Carnival Carnival Cruise , 563 U.S. at 336 (holding that the contract’s prohibition notes 64–70. AT&T Mobility LLC v. Concepcion 145 at 593–94. at 597. 143 Concepcion See supra Id. Id. The Supreme Court has also validated consent to jurisdiction In his dissent in 146. 147. 148. Ins. Corp. of Ir., Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 143. 144. 145. See the discussion and cases collected in through action, “implicit” consent, as it were. As it said in Corporation of Ireland, Ltd. v. Compagnie des Bauxites de Guinee actions of the defendant may amount to a legal submission to the jurisdiction of the court, whether voluntary or not.” cion, 563 U.S. 333, 347 (2011) (“The times in which consumer contracts were any- thing other than adhesive are long past.”). against class-wide arbitration, though unconscionable under California law, would be applied because to find otherwise would be inconsistent with the Federal Arbi- tration Act). 694, 704–07 (1982). point: the contract required a consumer who service from AT&T to accept a wanted clause that “provided for arbitration cell phone of all disputes between the parties” and prohibited “‘any purported class or representative proceeding.’” 2018] ings that the cruise line enjoys by limiting the fora in which it may be sued. CONSENT TO JUDICIAL JURISDICTION 183 \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 25 22-MAY-18 10:16 waiver of access to courts and their due process protection is only a click away. my dissent by noting that only likely the to become aware of the most forum-selection provision . . meticulous . A care- passenger is ful reader will find the forum-selection clause in the 8th of the 25 numbered paragraphs.” Supp. 2d 829, 834–41 (S.D.N.Y. 2012). by registration is no more or less consensual. pelled” to accept their loss of access to court and the restriction on class-wide arbitrations, or was using the service of merely AT&T an Mobility “incentive”? Given the available reasonable phone companies assumption in the that same area all have similar contract requirements, this incentive comes very close to compulsion, yet and the Supreme Court held the contract enforceable. One might respond that the purchaser of a phone or a cruise could decline to buy rather than give up his right to sue, point. Having to choose is not the and same as compulsion. Jurisdiction that is precisely the CBG had purchased business-interruption insurance from the peti- tioner and other foreign insurers for its operations in the Republic 40268-nys_73-2 Sheet No. 17 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 17 40268-nys_73-2 40268-nys_73-2 Sheet No. 17 Side B 05/23/2018 07:56:14 150 The dis- noted that 152 The court of In response, 154 151 Bauxites Eventually, the judge imposed the 153 , 456 U.S. at 699 (1982). When CBG ran into difficulties, it sought compensa- at 700. at 705. 149 at 696. at 697–98. at 698. at 698–99. at 699. at 703–05. The Court’s “variety” of acceptable “express or implied Id. Id. Id. Id. Id. Ins. Corp. of Ir., Ltd. Id. Id. Id. In affirming, the Supreme Court reasoned: “The expression “The reasoned: Court Supreme the affirming, In 156 157 155 Justice White’s opinion for the Court in The district judge had put the defendants in a very difficult 149. 150. 151. 152. 153. 154. 155. 156. 157. “[a] variety of legal arrangements have been taken to represent ex- was analogous to that of a corporation faced with the choice of sub- mission to general jurisdiction or failure to register and thus tem- porary loss of the opportunity to bring an action in the true state. It that is an open-ended acceptance of general jurisdiction be could more problematic than the one-case acceptance of specific juris- diction facing the CBG defendants, but their and the loss same was problem not could confound trivial, them whenever they were sued in United States courts. position. If they failed to judge, provide they documents would as give up ordered their by court’s due the jurisdiction process over right them. to If contest they the complied, they provided documents would that have they regarded as private. Their position consent[s]” included stipulations, arbitration agreements, cross ac- 184of Guinea. NYU ANNUAL SURVEY OF AMERICAN LAWSome of the insurers moved for summary judgment on the ground [Vol. 73:159 that there was no personal jurisdiction over them. \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 26 22-MAY-18 10:16 of legal rights is often subject to certain procedural rules: The fail- ure to follow those rules may rights.” well result in a curtailment of the tion tion from the insurers, eventually bringing insurers an in federal court in action the Western District against of Pennsylvania. the sanction, also finding that the defendants were subject to jurisdic- tion based on the record regardless of the sanction. appeals affirmed the holding solely tion. on the ground of the sanc- CBG sought discovery of copies from of the movants, business-interruption with policies which they refused to comply. defendants if they did not. trict judge ordered the defendants to provide the material sought, threatening that he would assume jurisdiction over the recalcitrant press or implied court.” consent to the personal jurisdiction of the 40268-nys_73-2 Sheet No. 17 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 17 40268-nys_73-2 40268-nys_73-2 Sheet No. 18 Side A 05/23/2018 07:56:14 J. Mc- in per- The Su- A Texas See also 164 160 “Montes later “Montes 161 These examples could 158 The Texas corporation de- 162 , 456 U.S. at 704. Further, the Court was to the sweep of the general rule that juris- shows that the Court did not consider it as note 2, at 1381–82. This argument ignores The Texas court denied the enforce- supra 163 Bauxites Bauxite Bauxites is another case in which the Court validated 159 Monestier, See (citing cases). It has been argued that the lack of a specific reference at 61–62. at 1047–48. at 1048. itself, the Court upheld their constitutionality. may be rendered in a cross-action against a plaintiff in Id. Id. Id. Id. Id. Adam v. Saenger 158. 159. Adam v. Saenger, 303 U.S. 59 (1938). 160. 161. Adam v. Saenger, 101 S.W.2d 1046, 1047 162. (Tex. Civ. App. 1937). 163. 164. its courts, upon service of process or of appropriate pleading upon his attorney of record. The plaintiff having, by his volun- tary act in demanding justice from the defendant, himself submitted to the jurisdiction of the court, there is nothing pur- all for there being as him treating in unreasonable or trary arbi- poses for which justice to the defendant requires his presence. There is nothing in the Fourteenth Amendment to prevent a state from adopting a procedure by which a judgment sonam 2018] tions against the plaintiff, waiver, agreement in advance, and pres- ence in the state upon service of process. CONSENT TO JUDICIAL JURISDICTION 185 \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 27 22-MAY-18 10:16 implicit consent to jurisdiction. The question was whether a plain- tiff who was served on a “cross-action” could be held sented to have con- to jurisdiction in the place of the litigation. ment on due process grounds, holding that the Texas corporation was not otherwise subject to jurisdiction in California. have been labeled as compulsion, but Bauxites nonetheless, much like in brought a ‘cross-action’ against the corporation by service upon the corporation’s attorney of record in the pending suit to recover for the conversion of other chattels.” offering a set of examples—nowhere did it example of say consent jurisdiction. that Examples are just it that—examples. was listing every a to submit may person (“A (2011) 880 873, U.S. 564 Nicastro, v. Ltd. Mach., Intyre possible State’s authority in a number of ways.”). faulted on the cross action, so Montes obtained a the judgment California from court, which Adam, his successor to sought to the enforce in Texas. judgment, fornia for money due for goods sold and delivered. and sold goods for due money for fornia corporation had brought an action against Rodolfo Montes in Cali- preme Court reversed, holding that the judgment was valid: to jurisdiction by registration in registration by jurisdiction to the Court’s broad references in diction can be secured by consent, e.g., “In sum, the requirement of personal juris- diction may be intentionally waived, or for estopped various from raising the reasons issue.” a defendant may be still valid by 1982. 40268-nys_73-2 Sheet No. 18 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 18 40268-nys_73-2 40268-nys_73-2 Sheet No. 18 Side B 05/23/2018 07:56:14 , the 168 Saenger Saenger Justices Breyer and 169 J. McIntyre Machinery, Ltd. v. Of primary interest for this Article is 171 Expounding upon these ways, he writes: 172 Although the injury occurred in New Jersey, 165 166 Justice Ginsburg wrote a dissent joined by Jus- 170 , 564 U.S. at 880 (2011). The New Jersey Supreme Court found that jurisdic- 167 at 877. at 876 (Kennedy, J., was joined by Roberts, C.J., as well as Scalia and at 887 (Breyer, J., concurring). at 893 (Ginsburg, J., dissenting). Id. Id. Id. Id. Id. Nicastro . It affects several of the issues that have been raised regard- A fractured U.S. Supreme Court reversed. Justice Kennedy The similarity to registration jurisdiction is clear: in The concept of jurisdiction by consent was more recently re- 165. Adam v. Saenger, 303 U.S. 59, 67–68 166.(1938) (emphasis added). J. McIntyre Mach., Ltd. v. Nicastro, 564 U.S. 167. 873, 878 (2011). 168. 169. 170. 171. 172. It is the price which the state may exact as the condition of opening its courts to the plaintiff. There is, of course, explicit consent. State at the . time suit commences through . service of process . is Presence within another a example. Citizenship or domicile—or, by analogy in- corporation or principal place of business for corporations— wrote an opinion for a four-Justice plurality. lied upon in the plurality opinion in Nicastro ing registration jurisdiction. The issue was court could whether exercise jurisdiction over J. McIntyre Machinery, a Brit- a New Jersey ish corporation, in a product liability action brought the injured plaintiff. by Nicastro, consent given by the cross action was consent implicit of jurisdiction unlike accepted by the registration. explicit 186 NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:159 \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 28 22-MAY-18 10:16 Justice Kennedy’s opinion because he treats the matter of jurisdic- tion as one of submission: “A person may submit to a State’s author- ity in a number of ways.” lead to those products being sold in any of the fifty states.’” Alito concurred. tices Sotomayor and Kagan. tion was available, holding that “New Jersey’s jurisdiction over a foreign manufacturer of courts a product so long as the can exercise manufacturer ‘knows or reasonably should know that its products are distributed through a nationwide distribution system that might the Texas corporation had to choose between bringing an action in California and risking a cross-claim against it or giving up its oppor- tunity to sue the California defendant. Moreover, in the allegedly defective machine involved was made in England. had been sold to Nicastro’s It employer through an independent U.S. distributor. Thomas, JJ.). 40268-nys_73-2 Sheet No. 18 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 18 40268-nys_73-2 40268-nys_73-2 Sheet No. 19 Side A 05/23/2018 07:56:14 plu- The 176 178 of the Nicastro notice of the 181 general general jurisdiction In fact, the preceding quotation 180 On this view, a defendant that “‘pur- 174 He asserts that “jurisdiction is in the first 175 directly relates to the issues presented by regis- 173 belies the argument that explicit consent can Part IV. 179 Part V. , 564 U.S. at 878. Nicastro at 881. at 880–81(emphasis added). at 883. at 877. at 880–81. Justice Kennedy noted that J. McIntyre Machinery did not Id. Id. Id. Id. Id. Nicastro Id. See also infra See infra 177 The conception of jurisdiction as a matter of “submission” (or He applied the submission trope as well to specific jurisdiction, 173. 174. 175. 176. 177. 178. 179. 180. 181. also indicates general submission to a State’s powers. . . . These examples examples support exercise of State’s courts the and allow the State to resolve both matters that originate within the State and those events elsewhere. based on activities and consent) in tration-based jurisdiction. One, the plurality’s inclusion of “explicit consent” as one of the examples “that support exercise of the gen- eral jurisdiction” referring referring to it as “a more limited form authority for of disputes submission that to ‘arise out a of State’s or are connected activities with within the the state.’” effect only specific jurisdiction. 2018] CONSENT TO JUDICIAL JURISDICTION 187 \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 29 22-MAY-18 10:16 posefully avails itself of the privilege of conducting activities within the forum State’ . . . submits to the judicial power of an otherwise foreign sovereign. . . .” market goods in New Jersey or ship them there; that the company to them sold rather but directly, U.S. the in machines its sell not did an independent U.S. distributor; that its officials attended annual conventions to advertise its machines; and that no more than four of J. McIntyre Machinery’s machines reached New Jersey. instance a question of authority rather than fairness. . . .” is an acceptance of registration jurisdiction. Two, the effects of particular activities is not given to most of defendants the listed potential by the plurality. No state informs a neither jurisdiction, specific to lead may state a in activities its that a corporation plurality held that jurisdiction could not be exercised in New Jersey because the plaintiff did not “engage in any activities in New Jersey that reveal an intent to invoke or benefit from the protection of its laws.” rality contradicts the argument that consent to jurisdiction by regis- tration is invalid in the absence of specific warning: 40268-nys_73-2 Sheet No. 19 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 19 40268-nys_73-2 40268-nys_73-2 Sheet No. 19 Side B 05/23/2018 07:56:14 plu- The 183 Nicastro , the “canonical opinion in this area.” established that a corporation is subject to general ju- The difference between the two “homes” is striking in at 126. 2. Incorporation as Consent to General Jurisdiction 182 Id. Daimler Analysis of incorporation as a basis of general jurisdiction but- Most notably, the plurality opinion has much to say about the 182. Daimler AG v. Bauman, 571 U.S. 117, 139 (2014) 183. (“Here, neither the states in which it is incorporated and has its principal place of business. cause it is based on the consent that statutes of incorporation exact. We are so used to jurisdiction by incorporation that we do not no- tice that such jurisdiction sits very uneasily in modern jurisdictional theory. Incorporation does not equal or even imply that the corpo- ration has any agents, property, or offices within the state in which it is incorporated. By contrast, registration is predicated on “doing business” in the state. In this way, general jurisdiction over a regis- trant is more intuitively proper than over a corporation that is con- nected to the state registration jurisdiction inadequately contend with the universal only ac- by reason of ceptance of incorporation incorporation. jurisdiction. Critics of are “homes” corporate that and home” “at is it where only risdiction tresses the validity of general jurisdiction that by general jurisdiction by registration. incorporation is constitutional I only be- claim Daimler nor MBUSA is incorporated in California, nor does either entity have its principal place of business there.”). essential a given forum may maintain be a principal to place carrying of business), on no one business because would of (say, the argue manifest “compulsion” the that to jurisdiction would be in- valid. In fact, the general jurisdiction obtained by volves registration in- a lesser recognized by the plurality. degree The critical insight of the of rality compulsion is that all than acts that do yield result of jurisdiction the defendant’s over the choice. the actor examples are the 188 corporation that chooses a particular place as its principal place of NYU business, ANNUALnor an entity when SURVEYit incorporates. Accordingly, registra- OFtion AMERICANjurisdiction should not be LAWsubject to a “notice” rule. [Vol. 73:159 difference between consent and compulsion. by tradeoff a involve jurisdiction to “submission” of examples nedy’s All of Justice Ken- corporations (or persons) either to enter a state and themselves thus to subject jurisdiction or, alternatively, to avoid enjoy their the due process state right not to and be sued there. No matter how \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 30 22-MAY-18 10:16 the context of contemporary jurisdiction theory as International established in Shoe 40268-nys_73-2 Sheet No. 19 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 19 40268-nys_73-2 40268-nys_73-2 Sheet No. 20 Side A 05/23/2018 07:56:14 , ’s new approach It bears repeating 187 and “‘the relationship , the corporate defendant 185 International Shoe Pennoyer International Shoe Co. v. Washington 188 Applying , if he be not present within the territory of 186 limited the exercise of that power to persons or 184 , , 571 U.S. at 126. at 313. rest, became the central concern of the inquiry into per- in personam at 754 (quoting Shaffer v. Heitner, 433 U.S. 186, 204 (1977)). at 749 (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown, at 312–13. The state’s claim against the corporation sought to recover to sought corporation the against claim state’s The Id. Id. Daimler Id. Id. Implicitly referring to opinion opinion describes that theory and a bit of its history. Justice 189 190 The Court then applied this new approach to corporations. 186. 187. 184. Pennoyer v. Neff, 95 U.S. 714, 720 (1877). 185. 188.Milliken (quoting (1945) 316 310, U.S. 326 Washington, v. Co. Shoe Int’l 189. 190. Pennoyer maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.’” the forum, he have certain minimum contacts with it such that the The International Shoe Company was and had its incorporated principal place of business in St. Louis, in Missouri. It had Delaware no plants or offices in there. Washington but it did employ salesmen “due process requires only that in order to subject a defendant to a judgment 2018]Daimler Ginsburg’s opinion for CONSENT the TO JUDICIAL Court JURISDICTION observes Pennoyer that v. Neff the 1878 case of 189 \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 31 22-MAY-18 10:16 property property found within the state. She and observes interstate commerce took hold, “that strict territorial approach that as technology yielded to a less rigid understanding” sonal jurisdiction.’” among the defendant, the forum, and the the mutually litigation, exclusive sovereignty rather of the States than on which the rules of objected to jurisdiction on the ground that it was not “present” in Washington as “its activities within the state were not sufficient manifest its ‘presence’ there to and that in its absence the state courts unpaid contributions to the fund. state unemployment compensation to general jurisdiction over corporations, Justice Ginsburg summa- rized that “the inquiry . . . is . . . whether that corporation’s ‘affilia- tions with the State are so “continuous and systematic” as to render [it] essentially at home in the forum State.’” 564 U.S. 915, 919 (2011)). v. Meyer, 311 U.S. 457, 463 (1940)). that incorporation does not presence in entail the state “continuous if what and we mean systematic” by tional that presence, phrase but is instead not the a actual fic- presence exemplified principal by a place of business. As the more Supreme pragmatic approach Court in explained its 40268-nys_73-2 Sheet No. 20 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 20 40268-nys_73-2 40268-nys_73-2 Sheet No. 20 Side B 05/23/2018 07:56:14 193 Court International International Shoe The “home” referred to 195 The The Court later added: “To re- 191 : in one of the only two references 194 192 , 326 U.S. at 317 (1945). International Shoe at 316–17 (internal citations omitted). at 315. at 320. Id. Id. Id. Int’l Shoe Co. Id. The effect of incorporation on jurisdiction received only pass- Finding that the activities of International Shoe in Washington 191. 192. 193. 194. 195. merely to symbolize those activities of the corporation’s agent satisfy to sufficient be to deem will courts which state the within the demands of due process. Those demands may be such contacts of met the corporation with by the state of the forum as make it reasonable, in the context of our federal system of gov- ernment, to require the corporation to defend the particular suit which is brought there. Since the corporate personality is a fiction, although a fiction intended to be acted upon as though it were a fact, it is that clear unlike an individual within, its the state of “presence” its origin can without, be manifested only as by activi- ties carried well on in its behalf by as those who are authorized to act for it. . . . For the terms “present” or “presence” are used traditional conception of fair play and substantial justice. . . . “ ing reference in were “systematic and continuous” and that “[t]he obligation which is here sued upon arose out of those very activities,” “[i]t is evident that these operations establish sufficient contacts or state ties of the with forum to make the it reasonable and just according to our solved solved the problem of corporate presence by recognizing tion underlying the International fic- Shoe’s defense: 190 were without jurisdiction. NYU . . ANNUAL . SURVEY “ OF AMERICAN LAW [Vol. 73:159 \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 32 22-MAY-18 10:16 quire the corporation in such circumstances [of casual presence of other or home its from away suit the defend to agent] corporate the jurisdiction where it carries on more substantial activities has been thought to lay too great and unreasonable a burden on the corpo- ration to comport with due process.” to a corporate “home” the Court said, “An ‘estimate of the inconve- niences which would result to the from its home’ or corporation principal place of business is relevant in this from con- a trial away nection [to a proposed forum].” the state of incorporation. (The reference to the state of incorpora- tion as a corporate “home” had been used in nineteenth-century here as distinct from the principal place of business can only mean 40268-nys_73-2 Sheet No. 20 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 20 40268-nys_73-2 40268-nys_73-2 Sheet No. 21 Side A 05/23/2018 07:56:14 are Inter- 197 Putting “Cor- International 530, 72d at 4–7 Hertz Corp. v. . O 591, 602 (explaining To call the place . . N US EP 199 basic rejection of fic- was decided, simply a S. R L. & B L ’ NT But, regardless of . Yet, to my knowledge, no cor- . J. I 200 W N , 35 International International Shoe International Shoe’s International Shoe , 326 U.S. at 317. Merrick v. Van Santvoord, 34 N.Y. 208, 218 (1866) (suggesting this is very odd because the fact of incorporation says ) The implication is that when a corporation is sued in at 85–86 (“Since the Supreme Court has decided that a corporation is corporation a that decided 85–86has at Court Supreme the (“Since 196 corporations can and have chosen the state of their incor- See e.g. Int’l Shoe Id. Id. 198 , The Court had no need to explore the role of incorporation in , the answer is no, because consent to general jurisdiction is a 196. 197. 198. Hertz Corp. v. Friend, 559 U.S. 77 (2010). 199. 200. poration to obtain or where “perhaps avoid a State did no federal business at all.” court diversity jurisdiction, its “home” any “contacts of the corporation with the forum” 2018]decisions. CONSENT TO JUDICIAL JURISDICTION 191 \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 33 22-MAY-18 10:16 (1932))). of its incorporation in Louisville); Cincinnati & Charleston R.R. Co. v. Letson, 43 U.S. 497, 557–59 (1844)). that in 1844 the Supreme Court found that a corporation was a citizen of the state Shoe requirement of incorporation in every state. ever thereafter. As Justice Friend Breyer reminds us in where the filing is made, “home”, is guises its thus contradiction to a fiction, one that dis- not necessary to the exercise of jurisdiction. In the context of national Shoe nothing about convenience or activities within the state. Incorpora- tion is, and by 1947 when matter of filing some papers (by mail) with officer the appropriate and state paying some fees. The need never principals step foot of in the the state corporation at the time of incorporation, or that the corporation is at home in its chartering state); Caroline Kaeb, porate” Back into Corporate Personhood a citizen . . . it has become practice State for while corporations they to be do incorporated business in in one another.” (quoting poration has challenged this exercise of general jurisdiction. If such If jurisdiction. general of exercise this challenged has poration a challenge were made, would it be that successful? the One answer is might yes think if it depended on niences” faced by the corporation. the “estimate of inconve- tions as basis for jurisdiction. the context of the new pragmatic approach to International Shoe jurisdiction Company was as not incorporated in the Washington. Unquestionably, though, the notion that a mere filing of a few pa- pers to incorporate is a source of general jurisdiction grates against the basic theory of 40268-nys_73-2 Sheet No. 21 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 21 40268-nys_73-2 40268-nys_73-2 Sheet No. 21 Side B 05/23/2018 07:56:14 contacts and more in part on the state’s sub- state’s the on part in the corporation intentionally chooses Moreover, New York Business Cor- note 80, at 733. Finally, the corporation is likely to 203 supra § 402(a)(7) (McKinney 2018). AW . L ORP its incorporation decision incorporation its . C the incorporation process itself provides notice of the po- 202 US B Professor Lea Brilmayer emphasizes the role of consent at 733–34 (emphasis added). Id. 201 thorized to do business in this state under this chapter un- less in its certificate of incorporation authority it designates the or secretary of state as application such agent. for corporation and every upon authorized whom foreign process corporation served. against the corporation may be Professor Brilmayer’s insight is borne out by the actual require- In her exploration of general jurisdiction and its various Thus, New York treats domestic and authorized (registered) 201. Lea Brilmayer et al., 202. 203. N.Y. stantive law. (a) The secretary of state shall be the agent of every domestic (b) No domestic or foreign corporation may be formed or au- that justifies general jurisdiction over the corporation. Second, the corporation, unlike an individual, cannot ever from be the absent state of incorporation. Third, even if neither a does corporation business nor maintains an office in the incorpo- rating state, tential for judicial jurisdiction. be familiar with that state’s law, arguably more familiar than an individual domiciliary would be, because the corporation pre- based sumably In some respects, the decision to incorporate state in provides a a more particular powerful basis for adjudicatory jurisdic- tion than does domicile. First, to create a relationship with the sumably state to of obtain incorporation, the pre- benefits of that state’s procedural substantive laws. and Such a choice creates a unique relationship of state as agent of the corporation upon whom process against may it be served and the post office state to which address the secretary of state within shall mail a copy of or any process without this against it served upon him.” ments of incorporating. The certificate one must file to incorporate in New York, for example, includes a “designation of the secretary sources, foreign corporations the same. Each is required to accept the secre- tary of state as its agent for the service of process. thorized Indeed, the au- foreign corporation will often have 192 NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:159 \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 34 22-MAY-18 10:16 as the basis of jurisdiction by incorporation. She explains: porations Law Section 304 provides: 40268-nys_73-2 Sheet No. 21 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 21 40268-nys_73-2 40268-nys_73-2 Sheet No. 22 Side A 05/23/2018 07:56:14 , . . . As I 206 Interna- 207 Pennsylvania that the state of and Transcendental Nonsense where a corporation is Daimler The reference to a cor- Transcendental Nonsense and the Bagdon 209 809, 810 (1935). and . EV . L. R But this reasoning by metaphor is note 80, at 758. Goodyear 210 Professor Brilmayer thus assumes that OLUM C 205 supra notes 115–19. .” , 35 supra implicitly undermined . He observes that “[T]he question of One way to distinguish the two would be to accept in light of “the minimum contacts approach of 208 discussion at 758–59. at 756 (“The constitutional limitations on assertion of judicial juris- 204 Id. Id. See How shall we reconcile acceptance of incorporation as a basis Professor Professor Brilmayer suggests that the constitutionality of “un- 204. Lea Brilmayer et al., 205. 206. 209. Daimler AG v. Bauman, 571 U.S. 117, 210.122 (2014). Milliken v. Meyer, 311 U.S. 457, 462–64 (1940) (“Domicile in the state is 207. 208. The difficulty of determining where a corporation “is” has never been but she does not explore the role of consent by registration. for general jurisdiction when, despite the same tion consent, is not? registra- 2018] relations with the state than a domestic corporation, yet the former and not the latter has been challenged CONSENT TO on JUDICIAL constitutional JURISDICTIONgrounds. limited general jurisdiction” based on registration and the designa- tion of an agent does not seem “viable under today’s standard” due process 193 \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 35 22-MAY-18 10:16 International Shoe alone sufficient to bring an absent defendant within the reach of the state’s juris- diction for purposes of a personal judgment by means of appropriate substituted service . . . . One such incidence of domicile is amenability to suit within the state employed and provided has state the where state, the without sojourns during even a reasonable method for apprising such an absent party of the proceedings against him.”). troublesome. Corporations do not have “homes.” People do. difference The is not merely a matter of bad guises a logic; real-world the difference between metaphor a dis- person’s domicile and an entity’s place of incorporation. The reference of a corporate home the ipse dixit statements in incorporation is the corporate “home.” porate “home” is apparently an analogy to the rule governing natu- ral persons, which holds that one’s domicile or basis “home” of is general a jurisdiction. valid tional Shoe v. Washington have already shown, that assumption is not justifiable. diction based on general consent are would unclear; intervene . the . . Due .”). Process Clause possibly better presented than by Felix Cohen, in his article Functional Approach Camp to have pointed Cohen’s article to me. Felix Cohen, and the Functional Approach not a question that can be answered by empirical observation. Nor is it a question that demands for its solution any analysis of political considerations or social ide- als. It is, in fact, a question of identical which metaphysical scholastic status with theologian the are question supposed of to have many angels can stand on argued the point of a needle.’” at I am grateful to Professor Bryan great length, ‘How 40268-nys_73-2 Sheet No. 22 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 22 40268-nys_73-2 40268-nys_73-2 Sheet No. 22 Side B 05/23/2018 07:56:14 See specifically dis- . It is remarkable Thus, the metaphor ? 213 DAIMLER International Shoe International Shoe is consent, which likewise under- The deficiency of the “home” met- IV. 212 Domicile of an individual is based on , 13 Pet., 519, the court said that a corporation 211 does not openly attack registration juris- . UNDERMINE Daimler International Shoe , Marshall v. Balt. Co., 57 U.S. 314, 328–29 (1853). The issue DOES REGISTRATION JURISDICTION Bank of Augusta v. Earle International International Shoe See, e.g. Even though 212. J. McIntyre Mach., Ltd. v. Nicastro, 564 213.U.S. 873, 881 (2011). Hertz Corp. v. Friend, 559 U.S. 77, 86 (2010). 211. Covington Drawbridge Co. v. Shepherd, 61 U.S. 227, 233 (1857) (“And in the justification of general jurisdiction based on incorporation that is diction, some courts and commentators have argued that registra- sue or be sued in any other state. Holding that the corporation was a citizen of the state in which it was incorporated, diversity jurisdiction requirement was met. also case of the can have no legal existence outside of the created. dominion Consequently, of the the Covington State Drawbridge by Company which being it the chartered is by State of Indiana, it necessarily State.”). has its home and place of business in that there was whether corporations were “persons” for the purpose of diversity diction. juris- The Court observed that if diversity was not available, the plaintiff’s only recourse would be an action in state court, an outcome that the Court found as an unwise limitation of diversity jurisdiction. More legalistically, the Court explained that the corporation, a creature of Maryland, where it was incorporated, could not 194or “residence” had been used in the nineteenth century in a variety NYUof contexts, but this hardly ANNUAL justifies the continued effect on jurisdic- SURVEY OFtion post- AMERICAN LAW [Vol. 73:159 \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 36 22-MAY-18 10:16 claimed the use of fictions in jurisdictional law, continues to apply a fiction to justify general jurisdiction in a place far away from corpo- rations’ actual business “homes.” A better—and in fact the only— consistent with lies registration jurisdiction. actual, ongoing, physical connection with that place. Incorporation implies nothing of the kind. The fictitious corporations “home” does nothing metaphor to for justify general jurisdiction based on incorporation—“that concept, like other metaphors, has ciencies as well as its utilities.” its defi- physically in the state of incorporation, and therefore it is convenient for not it in- to litigate in that state. Realistically, however, in- corporation by no means says anything about the actual connection to the state or its capacity to litigate there. aphor is its implication that the corporation is in some sense disguises the reality that incorporation jurisdiction is in many ways at odds with the core holding of that the Supreme Court, which in 40268-nys_73-2 Sheet No. 22 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 22 40268-nys_73-2 40268-nys_73-2 Sheet No. 23 Side A 05/23/2018 07:56:14 , 223 and for Daimler Lockheed Lockheed Martin . Although 100 years , Justice Strine, speaking Daimler few states have “grasped” it. Cepec 220 Consequently, the court inter- upheld the constitutionality of In In his opinion in 218 215 ” 214 note 2, at 1346. He saw this as a potential problem for Another survey of the states in which regis- 216 She lists only several other states in which note 2, at 1368 n.121. supra Goodyear. , 243 U.S. 93 (1917). 222 221 Pennsylvania Fire and supra note 5. To avoid this unhappy result, he wrote, “Delaware 217 219 , Monestier, at 144. at 143. at 148. Daimler . See supra Id Id. Id. Id. Pennsylvania Fire E.g. The prediction that many states will adopt general jurisdiction 222. 223. 215. Brown v. Lockheed Martin Corp., 814 F.3d 216.619, 639 (2d Cir. 2016). Genuine Parts Co. v. Cepec, 137 A.3d 123, 143 217. (Del. 2016) (quoting 218. 219. 220. 221. Monestier, 214. “theoretically, under the [plaintiffs’] position, major Delaware pub- tion gives us no reason states—if any—will to amend or interpret existing registration statutes believe that a substantial to establish number general of jurisdiction post- have passed since general jurisdiction by registration, by registration is mistaken for two reasons. First, it has been proven wrong empirically. The history of general jurisdiction by registra- should be prudent and over proportionate foreign corporations, and in a narrower exercising reading of [its jurisdiction registra- tion statute] accomplishes that.” Daimler AG v. Bauman, 571 U.S. 117, 138 (2014)). tration was so interpreted found only six states that clearly did so. did clearly that states six only found interpreted so was tration 2018] tion jurisdiction will undermine the policy goals of CONSENT TO JUDICIAL JURISDICTION 195 \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 37 22-MAY-18 10:16 preted its jurisdiction. registration statute as not conferring general Judge Carney, for one, asserts that an acceptance of registration ju- risdiction “would risk unraveling the jurisdictional structure sioned in envi- According to Professor Monestier, only has one enacted a statute that, by its terms, states that registration yields state (Pennsylvania) general jurisdiction. the courts that have held that “corporate registration general jurisdiction.” amounts to lic corporations with national markets could stockholders be on an internal sued affairs claim by in any its state in the [sic] nation because the corporations have had to every state.” register to do business in Delaware because of the many companies incorporated there— for the Supreme Court of Delaware, observed that “[h]uman expe- rience shows that ‘grasping’ behavior by one, can lead to grasping behavior by everyone.” that reason is unconstitutional. 40268-nys_73-2 Sheet No. 23 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 23 40268-nys_73-2 40268-nys_73-2 Sheet No. 23 Side B 05/23/2018 07:56:14 225 224 . and Daimler Goodyear and International Shoe Goodyear supports my view that . A state may view registra- Cepec In part, the Delaware court was decided in 2011. For cur- was decided. One might argue 226 Daimler 227 and and Goodyear Goodyear Pennsylvania Pennsylvania Fire notes 8–9. dealt with the reach of the extant Delaware registra- , 137 A.3d at 148. at 143. Int’l Shoe Co. v. Washington, 326 U.S. 310, 318 (1945) (“While it has illustrates how states can have different interests with re- See supra See Cepec Id. Cepec 224. 225. 226. 227. those cases. This point overlooks the amorphous and thus dictable unpre- nature of the “substantial and continuous” rule then gov- erning general jurisdiction as was explained in States seeking more clarity in jurisdiction could better have off been adopting much registration jurisdiction to avoid the problems of the “substantial and continuous” rule. Ironically, the decision of the Supreme Court of Delaware there will in likely be no “grasping” by registration post- Daimler. Cepec tion statute and, overruling lower courts, held that the statute did not authorize general jurisdiction. 196No state has done so since NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:159 that there was no need to rely on registration jurisdiction prior to the evisceration of general jurisdiction by because plaintiffs could rely on general jurisdiction based “substantial on and the continuous” doctrine that was in effect prior to \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 38 22-MAY-18 10:16 spect to jurisdiction and leads to the second reason that registration that reason second the to leads and jurisdiction to spect does not undermine rent rent purposes, it does not matter whether there states are that ten have or seven adopted general jurisdiction by obvious that for registration. whatever reasons, the It great majority is of states have not done so since States’ largest corporations, Delaware has a strong interest in over- reaching in this sensitive area.” was also moved by a concern for the interests of the companies in- corporated in Delaware—“as the home of a majority of the United been held in cases on which appellant relies that continuous activity of some sorts amena- be corporation the that demand the support to enough not is state a within ble to suits unrelated to that activity . . . continuous there corporate operations have within a been state were thought instances so substantial in and of which the such a nature as to justify suit against it on causes of action arising from entirely dealings distinct from those activities.”). tion jurisdiction as protective of its citizens and choose to risk the possibility that some corporations will avoid the state. Other states, like Delaware, may decide that using registration as a jurisdictional door would be contrary to the state’s benefit. States might reasona- bly decide that registration-based that Perhaps states. those in business doing from corporations some jurisdiction would discourage is the reason why the great majority of states have so decided. Given 40268-nys_73-2 Sheet No. 23 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 23 40268-nys_73-2 40268-nys_73-2 Sheet No. 24 Side A 05/23/2018 07:56:14 ex- The notice 228 note 2, at 1344 n.4 231 supra Monestier, V. § 5301 (Purdon 1990)). . see also NN Whether the definitive holdings of the As described previously, the Second Cir- Second the previously, described As . A 234 229 Part II; TAT note 2, at 1393. S THE ISSUE OF NOTICE to general jurisdiction as a condition on a for- supra that registration is consent to general jurisdic- AND . It cited the Pennsylvania statute, which specifi- supra 235 232 ONS The court also observed that “[t]he registration stat- . C 233 A discussion P at 641. at 637–38. at 640. at 637 (citing Bane v. Netlink, Inc., 925 F.2d 637, 640 (3d Cir. 1991) at 640. Lockheed Martin. Lockheed Id. Id. Id. Id. Id. See While declining to hold that general jurisdiction by regis- 230 Another due process concern raised by commentators and The court noted with apparent approval that other jurisdic- 229. Brown v. Lockheed Martin Corp., 814 F.3d 230. 619, 637 (2d Cir. 2016). 231. 232. 233. 228. Monestier, 234. 235. will subject them to general jurisdiction. gues that, except for Pennsylvania, registration statutes do not fairly Professor Monestier ar- alert the corporation of the jurisdictional effect of the “paperwork” or the “governing statutory scheme [of registering].” courts is that corporations lack adequate notice that registration tions “more plainly advise the registrant” of the jurisdictional effect of registration. 2018]the importance of state sovereignty and the long respect sent in for American con- jurisprudence, the states CONSENT should TO not JUDICIAL be JURISDICTIONconstitu- tionally prohibited from recognizing registration jurisdiction. 197 \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 39 22-MAY-18 10:16 tration was unconstitutional, the court was troubled by the lack of notice by the statute or state court decisions that would alert regis- trants of the jurisdictional effect of registration. cally provides that “qualification” (registration) by a foreign corpo- ration is “a jurisdiction. sufficient basis” on which to authorize New general York courts tion would also satisfy the Constitution was not considered. But the opinion in dicta stated that “a carefully drawn state statute that pressly required consent eign corporation’s doing business in the state, at least in cases (citing cases). (quoting 42 ute in the state of New York has been definitively construed to ac- complish that end . . . .” cuit held that the defendant corporation’s registration in Connecti- cut could not be read as state. consent to general jurisdiction in that issue was also addressed by Judge in court Carney in his opinion for the 40268-nys_73-2 Sheet No. 24 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 24 40268-nys_73-2 40268-nys_73-2 Sheet No. 24 Side B 05/23/2018 07:56:14 241 , The 236 Rejecting the defense 237 Burnham v. Superior Court No warning or notice is re- 240 , 243 U.S. 93, 95 (1917). itself forecloses arguments that actual notice Sae Han Sheet Co. v. Eastman Chem. Corp., No. 17 Civ. But see Amelius v. Grand Imperial, L.L.C., 64 N.Y.S.3d 855, 869 (Sup. Ct. at 96. More generally, there is no support for a rule that a state Pennsylvania Fire Id. Id. Id. In other words, the defendant had the responsibility of an- 239 238 see also For example, the Constitution does not prohibit the exercise Pennsylvania Pennsylvania Fire 236. Brown v. Lockheed Martin Corp., 814 F.3d 619, 641 (2d Cir. 2016) (em- 237. 238. 239. 240. Burnham v. Superior Court of Cal., Cty. of Marin, 495 241. U.S. 604, 604 Justice Scalia did not mention the issue of notice or consent in find- in consent or notice of issue the mention not did Scalia Justice phasis added). 198 brought by state residents, NYU might well ANNUAL be SURVEY constitutional.” OF AMERICAN LAW [Vol. 73:159 \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 40 22-MAY-18 10:16 ing that presence in the state allowed general jurisdiction. Brennan, concurring Justice with the judgment, relied in part on the “fact that American courts have announced the rule for perhaps a cen- defendant to obtain jurisdiction over it. of general jurisdiction over a person who is physically but only tem- porarily present in the forum state. must provide specific notice or obtain actual formal consent from a ticipating the effects of its registration: takes “[the] the risk party of executing the it interpretation that courts.” may be put on it by the that the Missouri court did not obtain general jurisdiction by such service, the Supreme Court said: agent in language that rationally might be held to go to that length. “[The insurer] did appoint an The language has been held to go to that length, and the construc- tion did not deprive the defendant of due process of law even if it took the defendant by surprise, which we sert.” have no warrant to as- tion in New York does not confer jurisdiction on the registrant) (emphasis in origi- in (emphasis registrant) the on jurisdiction confer not does York New in tion nal); 2734 (ER), 2017 U.S. Dist. LEXIS 173410, at *13 (S.D.N.Y. Oct. 19, 2017) (registra- quired. In his opinion for the Court in court’s court’s suggested requirements, which would involve more notice than is already provided (by statute or well-developed judicial hold- ings), are not supported by precedent and should not be adopted. of attorney that made service on the superintendent the equivalent of personal service [upon the company].” need be given in There, the the Supreme Court upheld registration statute jurisdiction despite to the effect lack of registration actual consent jurisdiction. or even notice of pact the of registering. jurisdictional The im- defendant insurer “had executed a power 2017) (finding that Yelp was not subject to general jurisdiction in New York merely because it registered to business there). (1990). 40268-nys_73-2 Sheet No. 24 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 24 40268-nys_73-2 40268-nys_73-2 Sheet No. 25 Side A 05/23/2018 07:56:14 and has not Pennsylvania Fire VI. the entity is not given explicit warning CONCLUSION § 402(a)(7) (McKinney 2018). 244 AW . L ORP . C ‘clear notice that [he] is subject to suit’ in the , World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 US B Notably, Justice Brennan’s concurrence did not require at 636–37 (Brennan, J., concurring) (emphasis in original). today Id. See, e.g. 242 The constitutionality of general jurisdiction by registration was Applying the same concept to corporations, it is noteworthy 243 242. 243. 244. N.Y. established almost a century ago in that no notice or writing of consent is required to obtain tion jurisdic- over a corporation when it chooses its principal place of busi- ness. The law implicitly assumes that the principals of the entity will be aware of it, an assumption that may or not be tion, the other true. “home” of a Incorpora- corporation, is a different matter. State laws typically provide that an entity cannot corporation obtain without designating the a state status official as of an agent a for ser- vice of process. However, aside from requiring the designation of a state official for service, (1980) (“When a corporation purposefully ducting avails activities within the itself forum State . . of . it has clear the notice that it is privilege subject to suit of there, and can con- act to alleviate the risk of burdensome litigation by procuring insurance, passing the expected costs to customers, or, if the severing risks its are connection too with the great, State.” (cleaned up)). 2018]tury . . . [that] provides a defendant voluntarily present in a particu- lar State CONSENT TO JUDICIAL JURISDICTION 199 \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 41 22-MAY-18 10:16 bly, the corporation-to-be has “clear notice” of that effect by virtue of counsel’s advice, or is assumed to know that the designation the of state official is consent to state. accept There general is no jurisdiction reason in why that the designation registration should not also satisfy that as proper notice to the regis- required as part of trant. Rather, the same assumption of “clear notice” that is applied for all other means of obtaining jurisdiction should be applied registration to jurisdiction. that incorporation will yield general jurisdiction over it. Presuma- been relied upon by well. the Court to find specific jurisdiction as a sign posted on the state border, let alone prior written consent by the defendant. Obviously, the “clear notice” to which Justice Bren- nan refers is a fiction: how many New Yorkers (or foreigners) know that they can be sued in New Jersey on any claim whatever it may be when they voluntarily enter that state? The fiction that defendants have “clear notice” such that jurisdiction over them is justified has forum.” 40268-nys_73-2 Sheet No. 25 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 25 40268-nys_73-2 40268-nys_73-2 Sheet No. 25 Side B 05/23/2018 07:56:14 Daimler Exacting gen- Exacting Part II. 245 the attack on regis- supra 248 and the recent narrowing 247 discussion see also Part III.B. notes 37–41. supra supra notes 37–41. explicitly challenges the long line of cases validating Storwal Int’l, Inc. v. Thom Rock Realty Co., 784 F.Supp. 1141, 1145 discussion discussion See See supra See See From the position of persons and entities with claims against The justifications for registration jurisdiction include the 246 245. 246. 247. 248. Goodyear or a foreign corporation, moreover, the availability of general jurisdic- tion by registration is desirable as a matter of fairness. Registration jurisdiction may provide the only forum in which an injured party may sue in its own “home.” Given the modern judicial consent jurisdiction defense in many of contexts, business in the state anyway but decline to register (risking little if any sanction), or they may elect to register. Importantly, these op- tions reflect realistic alternatives that individual corporations pursue according can to their particular purposes. Nothing in consent. Rather, the Court’s long and continuing endorsement of state exercise of general jurisdiction based only on within the incorporation state—i.e., by consent and nothing more—strongly sup- ports the constitutionality of registration jurisdiction. state’s intention to keep a level playing field between domestic and it. in business doing enjoy that competitors foreign 200 since been challenged by the NYU Supreme Court. overrule ANNUALit The are not arguments persuasive SURVEY largely to because registration by a OFcor- poration AMERICAN reflects a knowing, voluntary choice. LAWThe Supreme Court has regularly upheld state judicial jurisdiction based on [Vol. implicit or 73:159 defendant the appeared it where situations in even consent, explicit lacked any realistic alternatives. given by The registration is not freely given ignores the reality assertion of corpo- that the rate principals’ consent powers of decision. Weighing the alternatives, they may elect to limit or avoid activity in some states or to proceed with \\jciprod01\productn\N\NYS\73-2\NYS201.txt unknown Seq: 42 22-MAY-18 10:16 ing. eral jurisdiction is an important way of accomplishing that level- tration general jurisdiction itself is “unacceptably grasping.” of other applications of judicial jurisdiction, (S.D.N.Y. 1992) (“The purpose of the statute equal footing is with domestic to ones.”); put foreign corporations on 40268-nys_73-2 Sheet No. 25 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 25 40268-nys_73-2 40268-nys_73-2 Sheet No. 26 Side A 05/23/2018 07:56:14 R R R R R R R R R R R R R R R R R . . . . . 227 ...... 211 ...... 237 ...... 203 ...... 230 ...... 220 ...... 203 ...... 219 ...... 217 ...... 225 ...... 236 ...... 217 ...... 231 I. 201 INTRODUCTION ...... 201 ...... 239 SAURABH SAURABH VISHNUBHAKAT* 1. Leveraging Nonappealability 2. Defining Covered 3. Business Method Patents . . Stacking PTAB Panels 224 ...... 241 INTERVENE INTERVENE IN ITS OWN CASES? WHEN WHEN CAN THE PATENT OFFICE B. Features of Validity Review in the PTAB A. Federal Circuit Primacy B. PTAB Review as Policymaking C. Patent Office Intervention in PTAB Appeals A. Standing to Intervene B. The Scope of C.Intervention Implications for Private Intervenors A. Concerns Over Patent Quality Last summer, the U.S. Court of Appeals for the Federal Circuit I. Introduction * Associate Professor, Texas A&M University School of Law; Associate V. Conclusion II. Agency Adjudications of Patent Validity IV. The Constitutionality of Intervention III. The Constitution of Intervention whether maintaining the appeal would violate the case or contro- issued an unusual sua sponte order. An appeal had come from the Patent Trial and Appeal Board, a tribunal within the Patent Office that reevaluates the validity of patents that issued. The owner of the patent at issue had lost in the tribunal and the agency previously sought review. The prevailing patent challenger did not defend its victory on appeal, but the Patent Office tribunal’s decision. The intervened Federal Circuit asked, among other to things, defend its Professor, Texas A&M University Dwight Look Duke Law Center for Innovation Policy. The author was formerly an expert advisor College of Engineering; Fellow, at the United States Patent and Trademark Office. The arguments in this writing are the author’s and should organization. Sincere not thanks be to imputed Dmitry Karshtedt to discussion, and the to Tanya Nathalie USPTO Pierce Gorman for or for helpful inviting to David this Moosmann any for article, research assistance. other and to Avi Laham and Appendix \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 1 22-MAY-18 11:21 40268-nys_73-2 Sheet No. 26 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 26 40268-nys_73-2 40268-nys_73-2 Sheet No. 26 Side B 05/23/2018 07:56:14 Town of Town Moreo- 2 7 The Patent 6 If so, was the 45, 55–64 (2016) 1 The AIA created . L.J. 4 Strategic Decision Making ECH T order was unusual, then, it ERKELEY B , 31 Knowles revisited the issue, partly resolving a circuit Among the Act’s most important changes was the 3 Parts I.B–C. The Patent Office also received the statutory authority 5 Id. See infra Resolving Resolving these questions is appropriate and necessary, espe- It is timely to inquire into the standing requirements for inter- 3. Leahy-Smith America Invents Act, Pub. L. No. 112-29, 125 Stat. 284 (2011) 4. Saurabh Vishnubhakat, Arti K. Rai & Jay P. Kesan, 1. Knowles Elecs., L.L.C. v. Matal, No. 16-1954 (Fed Cir. June 30, 2017) (per 2. 5. 6. 35 U.S.C. § 143 (2012). 7. 137 S. Ct. 1645 (2017). cially in the early years of a new which patent law now finds itself. In 2011, the Leahy-Smith America statutory regime like the one in Invents Act undertook the largest overhaul of nearly 60 U.S. years. patent law in (codified as amended in scattered sections of 35 U.S.C.). curiam) (order requesting supplemental briefing), media/2017/06/KnowlesOrder.pdf [https://perma.cc/7VXQ-LHK2]. https://cdn.patentlyo.com/ 202 versy requirement NYU of agency’s Director ANNUALhave standing—indeed, Article was the Director even re- SURVEY III OF of quired AMERICANseparately to the show it—in LAW order to intervene? Constitution. Did the [Vol. 73:201 \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 2 22-MAY-18 11:21 continued reallocation, from the courts to the Patent Office, of the power to review whether issued patents are valid. three new administrative adjudications with varying constraints. features and to intervene in appeals from which were to these be conducted administrative between adverse parties. adjudications, (discussing administrative post-grant opposition mechanisms prior to the AIA and under the AIA). split and offering guidance for the questions that remain. office had already intervened in scores of cases since the AIA’s en- actment without the Court raising questions as to the constitution- ality of such intervention. If the was because the Court had not raised the issue until now. in Court Supreme the Term, last Just cases. patent in venors Chester v. Laroe Estates Director Director obliged to defend the agency tribunal’s decision? ver, questions regarding the nature and scope of the Patent Office’s Patent the of scope and nature the regarding questions ver, ability to intervene in appeals from are administrative important for validity two reasons. review One is that they further inform ongoing Patent Office an agenda to redefine the agency’s relationship expos- an as Circuit, Federal the particularly courts, federal the with itor and originator of patent policy. Another is the that Patent Office the to intervene ability as a of matter of right is likely to influ- in Dual PTAB and District Court Proceedings 40268-nys_73-2 Sheet No. 26 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 26 40268-nys_73-2 40268-nys_73-2 Sheet No. 27 Side A 05/23/2018 07:56:14 II. A. Concerns Over Patent Quality AGENCY ADJUDICATIONS OF PATENT VALIDITY Concerns over patent quality and proposals for reform make This part describes the origins and features of administrative This Article explores those questions and the implications of up a rich, even dense, literature. A full survey of well that beyond literature the is scope of this discussion. Instead, larly what relevant is and particu- helpful for present purposes academic is and a policy debates sense about of patent how quality during the decade of first this century were crystallized through the administrative validity review proceedings of the AIA. Indeed, the legislative com- promises embodied in the Act reflect persistent themes about the patent examination process, symptomatic litigation abuses, and patent validity review under the AIA. been Although able courts to have reconsider long whether issued patents though are the valid, and Patent al- Office previously allowed tion, a mix of economic, for institutional, and jurisprudential concerns expert reevalua- about patent quality drove a push for even more powerful forms of review. In response, the AIA created three such proceedings. ful of contested cases and how PTAB review should be understood as a vehicle for agency policymaking. It is within this analytical ac- count that the appellate interventions of the Patent Office must be evaluated. Part Three offers a normative perspective tional requirements for the on agency to intervene, drawing constitu- on recent scholarship and Supreme Court guidance. It also Patent argues Office is that obliged under the certain conditions to show standing in order to intervene, and that these conditions also constrain the substantive positions that the agency can The take Article upon concludes intervening. with thoughts these on agency-intervention the principles potential upon impact private of tion party on appeal. interven- 2018] ence whether, and to what extent, private intervenors may also be able to participate in the reevaluation of patent rights. PATENT OFFICE AS INTERVENORthe various answers. Part One puts the issue of Patent Office stand- ing into context with a descriptive account of why the AIA so matically expanded agency adjudications of dra- patent validity, how the new adjudicatory mechanisms work, and what constraints operate on them. Part Two gives an analytical account of how appellate ju- risdiction over PTAB 203 review is currently coalescing around a hand- \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 3 22-MAY-18 11:21 40268-nys_73-2 Sheet No. 27 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 27 40268-nys_73-2 40268-nys_73-2 Sheet No. 27 Side B 05/23/2018 07:56:14 R R R . 13 EV 899, . L. R EV The statu- L. R 8 ORDHAM F OFSTRA , 82 H , 45 note 9, at 924–25 (discussing Road Map to Revolution? Patent-Based Commil U.S.A., L.L.C. v. Cisco Sys., Inc. note 9, at 925–26 (discussing utility). note 9, at 922–24 (discussing novelty). supra Defining Patent Quality supra supra The Field of Invention 339, 356 n.90 (2007) (explaining that the utility re- . , Lee Petherbridge, EV Vishnubhakat, Sufficient innovation requires that an invention Vishnubhakat, Vishnubhakat, 10 See, e.g. . L. R Christi J. Guerrini, E M see also It further requires that an invention be useful in the see also see also 12 , 59 Saurabh Vishnubhakat, Remarks at the American University Washing- The invention must also be patent-eligible subject matter 9 It also requires that an invention be nonobvious, rather See See generally 11 As an initial matter, patent quality may refer to several aspects 12. § 103; 8. 13. § 101; 9. Saurabh Vishnubhakat, 10. 35 U.S.C. § 101 (2012). 11. § 102; ton College of Law Supreme Court Series – [sic] (Mar. 31, 2015), http://www.pijip.org/events/commil 9YFT-8AZ3]. [https://perma.cc/ In a somewhat different articulation, patent quality stood in may terms be of under- probable validity (which corresponds ally), clarity and faithfulness (which corresponds specifically with legal with quality as to legal quality gener- the disclosure requirements), social utility (which corresponds largely with techno- logical quality), and commercial success (which corresponds to some extent with technological quality but largely with economic value). quality in the sense of private nonobviousness). Under current doctrine, the utility requirement represents a bar to patentability. fairly low practical Open Science 3091 (2014). than embodying trivial combinations knowledge. or extensions of sense of substantially existing achieving a meaningful intended purpose. Sufficient disclosure requires that the invention be described with enough operational detail to enable someone to practice the inven- tion and to identify what embodiments of the invention the inven- 204compromises the Likewise, effects. industry-specific and technology- NYUalso ANNUAL reflect a fairly stable consensus on SURVEY certain economic and insti- OFtutional AMERICAN arguments for reform, and the value of LAWa more prominent role for the Patent Office in [Vol. implementing 73:201 such reform. of the patent right: technological, economic, and legal. \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 4 22-MAY-18 11:21 be new in the sense of not having previously been described, sold, or offered for sale in the takes. same form that the current invention quirement is “very low and generally presents a low bar to patentability”). in the first place. 922–29 (2017). The invention must be sufficiently innovative as compared state of to the art and sufficiently well disclosed to advance the state of the the art. tory requirements for the grant of a technological standards that a prospective patentee must meet. The patent right impose certain Patent Office must grant patents only under certain conditions. 40268-nys_73-2 Sheet No. 27 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 27 40268-nys_73-2 40268-nys_73-2 Sheet No. 28 Side A 05/23/2018 07:56:14 R 16 & The 439, 205, . . EV ERGES When Bi- ECH 238 (4th M . L. R Ensuring HI 14 ATRICK ATERIALS . J.L. & T U. C P M ARV , 71 H OBERT note 9, at 926–28 (discuss- 15 R , Timothy R. Holbrook, , 29 ASES AND supra : C See, e.g. OLICY P Regardless of relative stringency, 1, 17 (2004) (citing Lowell v. Lewis, 15 F. 17 AW AND Vishnubhakat, 1237, 1251 (2012) (citing Utility Examination Saurabh Vishnubhakat & Arti K. Rai, . L.J. L NT see L.J. see also UKE & E ATENT P D , Patent Validity Across the Executive Branch: Ex Ante Foundations Ante Ex Branch: Executive the Across Validity Patent RTS Rethinking the Prospect Theory of Patents A , 61 UFFY D ARDOZO C Eldred v. Ashcroft, 537 U.S. 186, 216 (2003); Pfaff v. Wells Elecs., Inc., Arti K. Rai, Rai, K. Arti See See , 22 ITZGERALD John F. Duffy, The question of legal quality is, in essence, whether the right That an inventor must meet statutory requirements in order to F 14. 35 U.S.C. § 112(a); 15. 17. 550 U.S. 398 (2007); 16. KSR Int’l Co. v. Teleflex Inc. OHN J that the Patent Office has issued will survive judicial review. And it is legal quality that the patent quality dressed. debates have This is for primarily two interrelated ad- reasons. The first is that quality tends legal in part to subsume technological and economic qual- ity. Technological quality describes the contribution that an inven- tion makes to its contribution relevant are field. fairly lenient, Some such aspects as of the the doctrine of requisite utility. ing enablement, written description, and boundary notice). Others have become more stringent in decision Court’s Supreme the following nonobviousness of doctrine recent years, such as the in 2018]tor could reasonably be said to PATENT OFFICE AS INTERVENOR have possessed. 205 \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 5 22-MAY-18 11:21 Guidelines, 60 Fed. Reg. 36,263 (July 14, 1995) and however, an issued patent’s likelihood of surviving judicial ministrative or review ad- depends directly on whether necessary contribution it to the state of the art. has Technological quality made the is thus a component of legal quality. Cas. 1018 (C.C.D. Mass. 1817) (No. 8,568)). opharma Meets Software: Bioinformatics at the Patent Office a limited period of time, the public extracts the benefit of ensuring that only worthy inventions receive a patent. compliance compliance with these and other patentability requirements is the basic aim of the examination process. gain a monopoly ensures the economic quality rather of the the quality patent, of or the exchange public between that the grant of a patent right an involves. In exchange for the inventor and the patent owner’s ability to exclude others from vant practicing invention and thus the to recover supracompetitive rele- rents on it for 227–28 (2015) (discussing the doctrine of nonobviousness). ed. 2007)). Moreover, the utility requirement does not necessarily mandate do that a better inventions job than the prior art. 439–40 (2004). Treaty Power and the Patent Clause: Are There Limits on the United States’ Ability to Har- monize? 525 U.S. 55, 63 (1998); Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 484 (1974); see also for Policy Development 40268-nys_73-2 Sheet No. 28 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 28 40268-nys_73-2 40268-nys_73-2 Sheet No. 28 Side B 05/23/2018 07:56:14 The upshot of 20 1 (1984). . and thus is also a 18 TUD S Stylized Facts of Patent Litiga- 279, 282 (2015); Joshua D. . George L. Priest & Benjamin EV EGAL J. L 501, 525 (2014); Mark A. Lemley & , 13 L.J. B.U. L. R See generally Patent Litigation Reform: The Courts, Congress, , 95 though the widely appreciated nature NTITRUST 21 Patent Assertion Entities and Antitrust: A Competition A (Nat’l Bureau of Econ. Research, Working Paper , 79 , Paul R. Gugliuzza, , Jean O. Lanjouw & Mark Schankerman, Graham v. John Deere Co., 383 U.S. 1, 17–181, U.S. 383 Co., Deere John v. Graham objec- (discussing (1966) See E.g. See, e.g. The Selection of Disputes for Litigation Indeed, much of the early empirical work on the patent Similarly, Similarly, economic quality describes the potency of the exclu- The other reason why legal quality tends to draw focus in aca- long has data empirical where is litigation reason, same the For 18. 20. 21. 19. This is closely related, though not identical, to the economic insight that 19 sionary sionary patent right to clear the market for the patented service good and for or any reasonable substitutes of it. Like technological quality, this is also distinguishable from concerns judicial about review. surviving However, the commercial success of that an is attributable invention to its innovative qualities is, as a matter of trine, doc- part of the inquiry into nonobviousness, 206 NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:201 \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 6 22-MAY-18 11:21 system gave significant attention to litigated cases. lidity review, cancellations, remedies, and est. similar issues of inter- hand in that it that captures, to some extent, all three dimensions. demic and policy debates is that it is most readily observed legal in system. the Patents may fundamentally be fundamentally economic pertain to rights technological and advancement, but it is the legal process that typically mediates visible disputes over a patent’s validity, enforceability, and public or private importance. As sult, salient cases that change a or reaffirm prevailing understandings re- of patent law implicate legal quality, by reshaping both which pat- judicially be to is validity patent how and denied or granted are ents reevaluated in the future. been most readily available with respect to patent enforcement, va- component of legal quality. Referring to patent quality and the le- gal quality of a patent as analogous, therefore, is a reasonable short- tion: Value, Scope and Ownership No. 6297, 1997), http://www.nber.org/papers/w6297.pdf [https://perma.cc/4ZF T-3MY7]. this attention is that litigation trends are now widely accepted as a symptom of the patent quality-related excesses that the patent sys- tem’s defects can produce, Wright & Douglas H. Ginsburg, Cure for a Litigation Disease? of disputes that take place in the world. Klein, tive indicia of nonobviousness including commercial success and a unmet long felt need but for the problem). particular solution that the invention offers to cases selected for litigation are not necessarily a representative of the larger superset given and the Federal Rules of Civil Procedure 40268-nys_73-2 Sheet No. 28 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 28 40268-nys_73-2 40268-nys_73-2 Sheet No. 29 Side A 05/23/2018 07:56:14 Re- Pat- , 18 , 83 , 67 957 . L.J. . ANTA , 161 . S The Pri- EV They ECH and at- 27 T , 25 features 26 2117, 2170 How High Is High How . 283 (2011); L. R 29 . EV What’s the Con- EV ASON ERKELEY 1 (2009). . B . L. R 22 EV . L. R . M 19 EX EO ” , T OLUM 637 (2013); Ranganath G 1991 (2007). . C . L. R A 1 (2004) (finding the pres- The Direct Costs from NPE Dis- EV Y Patent Litigation, Personal Juris- , 90 ’ Extreme Value or Trolls on Top? . L.J. 43 (2010); Mark D. Janis, , 21 Patent Examiners and Litigation . 59 (2012). , 113 Shawn P. Miller, OL U. P EO Y EV ’ . L. R G and institutional OL EX & P 28 , 158 L. R T see also 140 (2014); Mark A. Lemley & Carl Sha- , 101 An Empirical Study of Patent Litigation Tim- . & P , 85 Against Settlement of (Some) Patent Cases Rethinking Standing in Patent Challenges ASON 313 (2013); Richard S. Gruner, S. Richard (2013); 313 981 (2010). 2075 (2014); Anup Malani & Jonathan S. NALYSIS . . . CON EV EV NLINE EV . M Litigation in the Middle: The Context of Patent-In- . A On NPEs, Holdups, and Underlying Faults in the 507 (2014). EO . . O CON J.L. E G . L. R L. . EV EV . L. R E Invalidated Patents and Associated Patent Examiners , 9 The Selection Effects (and Lack Thereof) in Patent Litigation: EX Predicting Patent Litigation ECH , 18 135 (2015); Shine Tu, and the optimal balance of risk and reward in reward and risk of balance optimal the and 387 (2014); James Bessen & Michael J. Meurer, T L. R . . L.A. L. R . L. R . T . 24 OPICS 159 (2008). EV . L. OY These studies have delved into specific empirical T Missing the Forest for the Trolls L ECH , 92 TAN 25 498 (2015); Megan M. La Belle, S ECH , 4 . . L.J. ORNELL . T L. R , 43 C EV , David S. Olson, , Michael J. Burstein, , Megan M. La Belle, , Shine Tu, , John M. Golden, , James Bessen & Michael J. Meurer, , Jonathan H. Ashtor, Michael J. Mazzeo & Samantha Zyontz, , 16 , ECH TAN 375 (2014); Brian J. Love, . & T S . , 99 T Alan C. Marco, Nuisance-Value Patent Suits: An Economic Model and Proposal . L. R EV NT ORNELL the potential for strategic litigation to create holdup and IGH See, e.g. See, e.g. See, e.g. See, e.g. See, e.g. See See, e.g. See, e.g. , 17 Raising the Stakes in Patent Cases ASH 23 H 99 C Patent litigation studies have offered evidence and argument Patent Holdup and Royalty Stacking . J. E . L. R , 23. 28. 29. 26. 25. 24. 22. 27. . W EO LARA AND AND diction, and the Public Good Outcomes putes on economic questions, such as the costs generated by the lawsuits of non-practicing entities that purchase patents solely for enforce- ment, questions about attributes of patents involved in litigation V G 923 (2004). V C A. Douglas Melamed, 2018]of selection effects cautions against overstating how representative litigated cases are of the patent system as a whole. PATENT OFFICE AS INTERVENOR 207 \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 7 22-MAY-18 11:21 other inefficiencies, other vate Costs of Patent Litigation fringement Injunctions nection Between Repeat Litigation and Patent Patents Litigated Quality? A (Partial) Defense of the Most Masur, ing: Could a Patent Term Reduction Decimate Trolls Without Harming Innovators? patent litigation. Sudarshan, shape the incidences and results of patent lawsuits. (2013). Evidence from Trials John R. Allison, Mark A. Lemley & Joshua Walker, The Characteristics of the Most-Litigated Patents ents at Issue: The Data Behind the Patent Troll Debate Too High?: Reflections on the Sources and Meaning of Claim Construction Reversal Rates at the Federal Circuit forming Patent Validity Litigation: The “Dubious Preponderance “Dubious The Litigation: Validity Patent forming ence of selection bias in patent litigation); tributes of the patent examiners who issue such patents. piro, (2014); Colleen V. Chien, have also explored how procedural Patent System 40268-nys_73-2 Sheet No. 29 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 29 40268-nys_73-2 40268-nys_73-2 Sheet No. 29 Side B 05/23/2018 07:56:14 , . , . A 31 32 FF Uni- CON RADE- O Market The NBER The . & T AT RAND J. E This mix of RADEMARK J. P Patent Statistics as (Nat’l Bureau of 33 , 21 , 86 . & T Reexamination vs. Litiga- The Quality of Ideas: Mea- AT 97 (Partha Dasgupta & 1661 (1990); Zvi Griliches, U.S. P , 16 (2005); Adam B. Jaffe, Manuel . 215 (2000); Adam B. Jaffe, Manuel ERFORMANCE 577 (1993); Manuel Trajtenberg, . . ITERATURE P EV CON . L CON . R (Nat’l Bureau of Econ. Research, Working CON Geographic Localization of Knowledge Spillovers as 119 (1998); Zvi Griliches, . CON Knowledge Spillovers and Patent Citations: Evidence Q.J. E J. E . E TAT The Value of Patents as Indicators of Inventive Activity M RAND J. E A , 28 ECHNOLOGICAL , 108 . & S T , 36 , 90 CON the use of backward- and forward-citation net- ; Bronwyn H. Hall, Adam Jaffe & Manuel Trajtenberg, . E 30 EV id. 441 (2004). , R , Jean O. Lanjouw & Mark Schankerman, , Bronwyn H. Hall, Adam B. Jaffe & Manuel Trajtenberg, Manuel & Jaffe B. Adam Hall, H. Bronwyn , OLICY AND Y ’ 1309 (2013); Paul Morgan & Bruce Stoner, . P OC EV , 80 . S See, e.g. See, See, e.g. See, e.g. See generally Office of the Chief Economist FF . L. R A second, more current body of research, however—and one O 30. 31. 32. 33. CONOMIC A E Economic Indicators: A Survey from industrial organization microeconomics about the classifica- tion of patents, that provides a better index of problems with patents—has the focused on legal patent examination rather quality than litigation. of Where litigation reflects symptoms, data process on reveals patent examination underlying into pathologies. patent quality has Contemporary extensively explored how research Patent Office ex- amination actually proceeds, what incentives and disincentives mo- tivate different actors in the process, and where potential reforms may lie. This research rests on two main foundations. One is work Patent Citations Data File: Lessons, Insights and Methodological Tools Econ. Research, Working Paper No. 8498, 2001), w8498.pdf http://www.nber.org/papers/ [https://perma.cc/LXR9-JAS8]. Penny for Your Quotes: Patent Citations and the Value of Innovations 172 (1990). and inferences about innovating activity from patenting The trends. other is the development and dissemination, starting in early 2010, of large and highly-documented datasets about patent exami- nation, examiner actions, post-issuance sales and transfers, renew- als, and a large number of bibliographic attributes. U. P MARK 208 NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:201 \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 8 22-MAY-18 11:21 tion—Making Intelligent Decisions in Challenging Patent Validity Value and Patent Citations Trajtenberg & Rebecca Henderson, Evidenced by Patent Citations Trajtenberg & Michael S. Fogarty, from a Survey of Inventors works as proxies for patent examination quality and patent value, https://www.uspto.gov/about-us/organizational-offices/office-policy-and-interna tional-affairs/office-chief-economist [https://www.perma.cc/ASC2-4J68]. Paul Stoneman eds., 1987). Ariel Pakes & Bronwyn H. Hall, in methodological tools and detailed data has now produced a rich .cc/A8MC-3SGS]; Rebecca Henderson, Adam B. Jaffe & Manuel Trajtenberg, versities as a Source of Commercial Technology: A Detailed Analysis of University Patenting, 1965–1988 suring Innovation with Multiple Indicators Paper No. 7345, 1999), http://www.nber.org/papers/w7345.pdf [https://perma 40268-nys_73-2 Sheet No. 29 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 29 40268-nys_73-2 40268-nys_73-2 Sheet No. 30 Side A 05/23/2018 07:56:14 . 1 EV . . L. , 11 L.J. 963 . EV Patent N.Y.U. OUS EV . L. R H MORY E , 68 INN . L. R L. R 613 (2015); , 54 . M , 58 , AND EV AVIS V , 97 and the role of Is the Time Allocated to . L. R 35 , 66 U.C. D 40 TAN These studies have 1601 (2016); Michael D. Information Overload at the S 36 Notice Failure and Notice Exter- Notice and Failure Notice , 49 They have also put for- Patent Liability Rules as Search L.J. 37 , 67 550 (2017); Michael D. Frakes & UKE . Scaling the Patent System reversing the statutory pre- D 38 90 (2011). . TAT , 65 ECH 379, 385 (2011); Jonathan Masur, Improving Patent Quality Through Identifica- . & S “Loser Pays” in Patent Examination Patent Asymmetries The Reciprocity of Search CON . L.J. Is the Patent Office a Rubber Stamp? Rubber a Office Patent the Is The Presumption of Patentability T . E Does the U.S. Patent and Trademark Office Grant Too J.L. & T S The PTO’s Asymmetric Incentives: Pressure to Expand EV R ALE HIO Y 1 (2013). O , 99 187 (2011); Jeffrey M. Kuhn, and improving the quality of information that . , 13 Patent Office Cohorts 39 470 (2011). EV , 72 NALYSIS 289 (2012); Jonathan S. Masur, asymmetries that favor granting patents by provid- L.J. A . L. R 34 , Tun-Jen Chiang, , Sean B. Seymore, , Susan Walmsley Graf, , Michael D. Frakes & Melissa F. Wasserman, , Sean B. Seymore, , Neel U. Sukhatme, , Peter S. Menell & Michael J. Meurer, J. Michael & Menell S. Peter , . L. ALE HI Y M EGAL . A J. L U. C See, e.g. See, e.g. See, e.g. See, See, e.g. See, e.g. See, e.g. See, e.g. , 121 URV , 5 For example, studies of the patent examination process have , 78 36. 39. 34. 38. 40. 35. 37. 165 (2016). . S . EV NN R A 181 (2008). 990 (2013). Inflation 2018] literature on patent litigation. examination process that rivals PATENT OFFICE AS INTERVENOR that addressed important economic questions, such as notice-related ex- on ternalities that can arise from lenient or imprecise demarcation of patent rights, 209 \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 9 22-MAY-18 11:21 Rules Review Patent Applications Inducing Examiners to Grant Invalid Patents? Evidence Microlevel from Application Data ing appellate review where the right may be improperly denied but not where the right may be improperly granted, ward a raft of proposals Office, such to as reform imposing ex the post processes ceeding financial or failing of consequences to secure for a the patent, suc- Patent sumption that patents unpatentability must (so that be the patent granted bears the examiner, burden), not absent the a applicant, showing of U.S. Patent and Trademark Office: Reframing the Duty of Disclosure Search in and Patent Filter Law Problem as a landscape that examination must navigate. search costs in evaluating the increasing complexity of the patent Frakes & Melissa F. Wasserman, Many Bad Patents?: Evidence from a Quasi-Experiment Sampat, Bhaven & Lemley A. Mark Melissa F. Wasserman, the Patent Office receives during examination. nalities tion of Relevant Prior Art: Approaches to Increase Information Flow to the Patent Office made much empirical progress toward illuminating both individual events during patent examination and overall trajectories that pat- ent applications take through the process. (2016); Melissa F. Wasserman, Substantive Patent Law (2013) (discussing patent search costs and introducing a cost-minimizing design); system Christina Mulligan & Timothy B. Lee, 40268-nys_73-2 Sheet No. 30 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 30 40268-nys_73-2 40268-nys_73-2 Sheet No. 30 Side B 05/23/2018 07:56:14 R , 42 , 51 This But see 46 123 (2006); Kevin . 1495 (2001). . ECH EV The key rationale “Peer to Patent”: Collective 44 Disguised Patent Policymaking . U. L. R . J.L. & T 45 W N ARV H , 95 note 4, at 51. This administrative system for , 20 43 supra 1219 (2004) (replying to Lemley). . The Porous Court-Agency Border in Patent Law EV 147 (2006). Saurabh Vishnubhakat, What Do Patents Purchase? In Search of Optimal Ignorance . L. R . L.J. OUS 495 (2007); Beth Simone Noveck, H ECH . But see T EV , 40 (forthcoming) (arguing that the history and structure of adminis- of structure and history the that (arguing (forthcoming) . L. R 915 (2018). . EV —and called for a second look. That the most visible ERKELEY EV Saurabh Vishnubhakat, at 51–55 (discussing administrative error-correction prior to the AIA). at 53–54. B 41 LARK L. R L. Id. See Id. Id. Rational Ignorance at the Patent Office Reforming Inequitable Conduct to Improve Patent Quality: Cleansing Unclean L. R , 21 & C The updated and invigorated system of administrative patent The The patent quality reform agenda that was ultimately enacted OWA 43. 46. 41. For a discussion of post-grant validity review as not just the only feasible 42. Vishnubhakat, Rai & Kesan, 44. 45. I KRON EWIS lier reexaminations, have a much more meaningful border between border meaningful more much a have reexaminations, lier other. each for substitutes as courts the and Office Patent the validity review that the AIA put in place shares these features. AIA proceedings, too, exist in parallel with federal court beit litigation, with al- some caveats. For example, AIA proceedings, unlike ear- in the AIA’s system of administrative review is best understood as an effort to correct patent quality problems that the examination pro- cess did not capture—indeed, was perhaps incapable of capturing up front A L cial correction began to soften in favor of administrative reevalua- tion by the Patent Office itself. 210 NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:201 Starting in the early 1980s, the virtually exclusive reliance on judi- \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 10 22-MAY-18 11:21 trative patent validity review reveals a desire for—or at least duce—politicalof questions resolving when expertise to addition in considerations a tendency to intro- patent validity). means of patent error-correction but also the more preferable means, see Mark A. Lemley, Shubha Ghosh & Jay Kesan, in the Patent Office Intelligence, Open Review, and Patent Reform given for this reallocation of power over patent validity, away from expertise—withwas agency, the details into scientific and the courts of invention and with the doctrinal details of patent law—in order to minimize cost, delay, and inaccuracy. symptoms symptoms of these problems appeared in the courts was particularly apt because the traditional means for revealing and correcting Pat- ent Office examination errors had also been court litigation. border is the result of several structural features, including stronger estoppel provisions and statutory time bars for leaving court and validity review existed in parallel with litigation courts, but was expressly intended to be a faster, cheaper, and more in the Article III accurate substitute for lay judges and juries. Mack, Hands 104 40268-nys_73-2 Sheet No. 30 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 30 40268-nys_73-2 40268-nys_73-2 Sheet No. 31 Side A 05/23/2018 07:56:14 R , FFICE O 48 , 817 F.3d 1293 RADEMARK and post-grant and & T 51 , https://www.uspto.gov/ ATENT U.S. P First is the petition phase, 53 note 4, at 64–77at 4, note strategic (discussing CBM (2014) supra AND IPR, PGR, This court-agency border, in turn, invites fo- 47 ETWEEN B These and other features of the PTAB process do 49 B. Features of Validity Review in the PTAB The issue of estoppel from an AIA proceeding upon later court Vishnubhakat, Rai & Kesan, & Rai Vishnubhakat, covered business method review, method business covered at 1305 (Reyna, J., concurring). IFFERENCES See See id. Shaw Industries Group, Inc. v. Automated Creel Systems, Inc. 50 52 Id. D All three types of proceedings are concerned essentially with Still, like earlier administrative adjudications, proceedings The desire for expertise—with its expected attendant benefits 48. 47. 49. 35 U.S.C. § 6(a) (2012). 50. Leahy-Smith America Invents Act, Pub. L. No. 112-29, § 6(a), 51. 125 Stat. § 18, 125 Stat. at 52.329–31. § 6(d), 125 Stat. at 305–11 (codified as amended at 35 U.S.C. §§ 321–329 53. The Patent Office has published a chart helpfully summarizing and com- AJOR (Fed. Cir. 2016). However, as pointed out, estoppel effects Judge are not for Reyna’s the PTAB, the Patent concurring Office, or the Fed- opinion eral in Circuit itself that to case decide in courts the or the International first Trade Commission—upon which instance, estoppel actually op- but rather by erates. the U.S. district the same problem—correcting patent function in examination generally the errors—and same way. under the AIA benefit from technical expertise. The administrative patent judges who sit on the PTAB are, in fact, not traditional ministrative ad- law judges but rather are hired specifically to serve in the Patent Office and, by statute, must be legal “persons knowledge and scientific ability” in order of to qualify for service competent on the PTAB. litigation, however, remains somewhat murky. The Federal Circuit addressed the issue in adjudication). 284, 299–305 (2011) (codified as amended at 35 U.S.C. §§ 311–319 (2012)). (2012)). paring salient features of the AIA proceedings. M litigant behavior in employing federal-court litigation and administrative much to frame and explain the Patent Office’s observed intervenor activity. Moreover, although the origins of this intervention reforms motivated by patent quality, the resulting transformation of lie in struc- larger a of part are system patent the in relations court-agency tural campaign toward a more independent Patent Office. of lower cost, faster resolution, and greater making—is accuracy merely in the decision- starting point for the AIA PTAB’s introduced design. The three new adjudicatory proceedings: review, inter partes 2018] going to the agency. PATENT OFFICE AS INTERVENOR 211 \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 11 22-MAY-18 11:21 review. rum rum shopping and other strategic behavior by litigants. 40268-nys_73-2 Sheet No. 31 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 31 40268-nys_73-2 40268-nys_73-2 Sheet No. 31 Side B 05/23/2018 07:56:14 59 Final 54 Post-grant review is 56 Meanwhile, inter partes review 57 As to grounds for challenging 58 Beneath these general similarities, however, lie im- 55 §§ 311(b), 321(b); § 18(a)(1)(C), 125 Stat. at 330; 37 C.F.R. See Notwithstanding these differences, the AIA proceedings also For example, the inter partes and covered business method re- 54. 37 C.F.R. §§ 42.100–.123, .200–.224, .300–.304 (2017) (respectively ad- 55. 35 U.S.C. §§ 319, 329, 56.141(c) (2012). § 311(c); §57. 6(c)(2)(A), 125 Stat. at 304; §§ 321(c); 18(a)(2), §125 Stat. at 58.330. 6(f)(2)(A), 125 Stat. at 311. §§ 311, 321; § 6(c)(2)(A), 125 Stat. at 304; § 6(f)(2)(A), 125 Stat. at 311; 59. have key similarities, especially with regard to who can request re- view, how the PTAB selects its cases, what standards the PTAB uses in its adjudications, and what aspects of the PTAB’s subject decisions to are judicial review. In inter partes review and post-grant view, re- anyone other than the patent owner may challenge the valid- ity of a challenge a patent in an Article patent III court—indeed, without meeting without meeting the standing requirement to portant differences that litigants must also take into account. views are available for patents without regard issued, including to prior when to the they AIA’s were passage. dressing inter partes review, review). post-grant review, and covered business method § 18(a)(2), 125 Stat. at 330; § 18(d)(1), 125 Stat. at 331. sites/default/files/ip/boards/bpai/aia_trial_comparison_chart.pptx sites/default/files/ip/boards/bpai/aia_trial_comparison_chart.pptx [https:// www.perma.cc/N5PU-9WHG]. 212 identifying a granted patent that appears not to satisfy the require- NYU ments for patentability. Next is the ANNUAL proceeding itself, which reevalu- SURVEY OFates AMERICAN the patent LAW in light of relevant The technical and conclusion other is evidence. [Vol. 73:201 the PTAB’s claims that, judgment, in the agency’s view, should not canceling have been granted. All those patent cases begin with a petition brought by a only third where party there is and enough proceed likelihood of eventual success. \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 12 22-MAY-18 11:21 method review can revisit virtually all major patentability ments require- and entertain a much greater scope of prior evidence. validity, inter partes review allows the Patent Office to about evidence certain only admits and nonobviousness and novelty revisit only prior inventions, but post-grant review and covered business and post-grant review proceedings are available without regard to technology, whereas covered business method re- as to all patents view is available only as to patents that cover non-technological fi- nancial products or services. available only for patents issued under post-AIA the rules first nine and months of issuance. within orders of the PTAB in AIA proceedings are appealable to the Fed- eral Circuit. § 42.304(b)(2). 40268-nys_73-2 Sheet No. 31 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 31 40268-nys_73-2 40268-nys_73-2 Sheet No. 32 Side A 05/23/2018 07:56:14 R OUVELLES This in- N 62 LES whereas the Three Years After 65 , 52 note 4, at 55. Cov- supra 66 61 The initial determination 67 15, 25 (2015). The reason for this, in In all three types of proceedings, . B.J. Id. 60 IR . C Given the difference, a patent con- ED 63 F , Post-Grant Proceedings at the USPTO and the Rising , 25 1007, 1024 (2017); Robert MacWright, L.J. AIA Proceedings: A Prescription for Accelerating the Availability of Ge- MORY E Cuozzo Speed Techs., L.L.C. v. Lee, 136 S. Ct. 2131, 2142 (2016). , 66 See Likewise, in all three proceedings, the burden for proving Finally, with regard to judicial supervision of the PTAB, only As to adjudicatory standards, in all three types of proceedings, 64 60. §§ 311(a), 321(a); Vishnubhakat, Rai & Kesan, 61. §§ 314(a), 324(a). In the case of covered business method review and 62. 37 C.F.R. §§ 42.100(b), 42.200(b), 42.300(b). 63. 65. §§ 316(e), 326(e). 66. Microsoft Corp. v. i4i, Ltd. P’ship., 564 U.S. 91, 67.95 (2011). §§ 319, 329, 141(c). 64. Nora Xu, Tide of Federal Circuit Appeals the final written decision regarding the validity (or not) of patent claims is subject to judicial review. the PTAB in construing and evaluating the scope of the patent gives patent the of scope the evaluating and construing in PTAB the each patent claim its “broadest reasonable construction.” ered business method reviews, however, cannot be filed preemptively but only in response to a district-court lawsuit alleging infringement of the patent in question. Leahy-Smith America Invents Act, Pub. L. No. 112-29 § 18(a)(1)(B), 125 Stat. 284, 330 (2011). post-grant review, review may also available where “the petition raises unsettled legal question that a is important to novel other patents or or patent applications.” § 324(b). 68, 70–71 (2017); Jason Mock 2018]any standing requirement at all. PATENT OFFICE AS INTERVENOR 213 \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 13 22-MAY-18 11:21 the America Invents Act: Practical Effects on University Tech Transfer whether to accept the case for adjudication, however, is not appeal- patent invalidity is a preponderance of the evidence the PTAB accepts cases if preliminary review suggests that they are sufficiently likely to succeed on the merits. brief, is that when understanding a patented invention broadly, one is more likely to tread on the body of prior knowledge knowledge in is the what field. patent This examination is treading supposed upon to prior guard grounds against, for invalidating and the patent. so Conversely, when it an invention is is understood narrowly, with clear differentiation between the invention and the patent prior is art, more likely the to survive review. strued under the PTAB method is, at the margin, more likely to be read broadly and consequently more likely to be invalidated than if the same patent were construed under ordinary district court meth- ods. corresponding burden in a court proceeding invalidity is by clear higher: and convincing to evidence. prove terpretive method is longstanding in initial patent examination, but examination, patent initial in longstanding is method terpretive it is different from the interpretive method used by federal courts for already-issued patents. neric Drugs 40268-nys_73-2 Sheet No. 32 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 32 40268-nys_73-2 40268-nys_73-2 Sheet No. 32 Side B 05/23/2018 07:56:14 R , 2013 , Reexami- SPATORE The error- A 73 , Ex parte , The background 70 FFICE The PTAB’s Influence of the of Influence PTAB’s The 65, 65 (2017); Phong D. O . AG Ex parte reexaminations, . M Even inter partes reexami- 71 Patently Practical Advice: The Impact 72 AW RADEMARK note 4, at 55–58. & T & N.J. L supra , 2012 WL 6636451, at *12 (Nov. 2012). ATENT , 307 U.S. P SPATORE A , Similarly, though none of these proceedings by 69 Part III.B.1. , Nichole M. Valeyko & Maegan A. Fuller, A. Maegan & Valeyko M. Nichole , C. Participatory Constraints on PTAB Review at 56–57 (citing at 57–58. Changes to Patent Law Practices Under the America Invents Act Invents America the Under Practices Law Patent to Changes Id. See infra Id. See, e.g. See, As discussed below, this immunity from judicial review is 68 In crafting the AIA, Congress took note of calls for greater 72. 68. §§ 314(d), 324(e). 69. 71. Vishnubhakat, Rai & Kesan, 73. 70. public input into questions of patent validity. Prior to the AIA’s en- actment, administrative reevaluations were not especially trial-like in the sense of robust adversarial presentation of argument and evi- dence—instead, they were reexaminations that placed the owner back in the patent posture of arguing with a patent examiner about the patentability of the given invention. strong—unusually strong by administrative law standards—and has important consequences for Patent Office incentives to exercise in- tervenor power. 214able. NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:201 \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 14 22-MAY-18 11:21 itself is capable of fully supplanting federal courts in reviewing pat- ent validity, there is largely a consensus that they are an alternative attractive for those challenging patent validity. cases by the patent owners themselves. ipation in PTAB review. These participatory constraints, in turn also turn in constraints, participatory These review. PTAB in ipation influence Patent Office incentives to exercise intervenor power. for example, had no third-party input beyond and, the according to initial USPTO statistics, request, were initiated in 29 percent of purpose of challenging patent validity—to resolve concerns about patent quality more effectively—has specific implications for partic- nations, the most immediate precursor largely to lay unused; the this was AIA due to proceedings, average case pendencies cess in of ex- three years followed by internal due to Patent disproportionately Office strong review estoppel provisions. and Nguyen, nation Filing Data—September 30, files/documents/ex_parte_historical_stats_roll_up.pdf 2014, [https://perma.cc/758D- http://www.uspto.gov/sites/default/ 5S5X]). WL 6683687, at *4 (Nov. 2013); Robert L. Stoll, of Recent Supreme Court and Federal Circuit Cases on Patent Law and How They Affect the Advice We Give Our Clients correction of patent validity through the strongly constrained by standing courts, requirements. In fact, meanwhile, the Federal was too being as criticized often was standing on jurisprudence Circuit’s Biotechnology and Pharma Industries 40268-nys_73-2 Sheet No. 32 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 32 40268-nys_73-2 40268-nys_73-2 Sheet No. 33 Side A 05/23/2018 07:56:14 R . J. EO , 19 , 23 G , 14 This 79 and to , 103 76 41 (2012). . 476 (2013); . EV EV 74 L. R Changing Standards of ASON Patent Conflicts —and did so. N.Y.U. L. R 78 . M EO , 88 A particularly nuanced G 75 , 20 A Politics of Intellectual Property: Environ- Expanding Standing in Patent Declaratory Judg- Tejas N. Narechania, 87 (1997). Rules for Radicals: A Politics of Patent Law L.J. see also UKE Allocating Power over Fact-Finding in the Patent System D L.J. 205, 214 n.24 (2016). 377, 416–17 (2017). . The Constitutionality of Administrative Patent Cancellation HI Patent Law as Public Law , 47 907 (2004). . L. note 16; 63 (2006); James Boyle, , Kali N. Murray, ECH , Nicholas D. Walrath, . L.J. . U. C supra These approaches would altogether sidestep the par- . L. OY ECH Arti K. Rai, 77 L . & T ROP T See, e.g. See See, e.g. CI . P , 48 Scholars Scholars have also argued as a matter of public administrative Instead, the preferred approach of Congress in the AIA was to 78. Greg Reilly, 79. §§ 319, 329. This judicial review has, of course, been governed by the Ad- 74. 77. Rai, 76. 75. 1483 (2015). ERKELEY NTELL I process that the Patent Office should treat patent rights more plicitly as public rights ex- through more formally participatory and de- liberative decision-making structures. ministrative Procedure Act and so is relatively more deferential than on review issues over of district court fact findings. Jeffrey C. Dobbins, Review ment Actions to Better Air Public Policy Considerations B L.J. B.U. J. S 2018] strict to allow otherwise through suits for desirable declaratory judgment of invalidity. challenges to patent validity PATENT OFFICE AS INTERVENOR 215 \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 15 22-MAY-18 11:21 ticipatory constraints of ticipatory litigation defects and however, of render they remain largely unimplemented in moot patent reexamination. law. the With par- a few throw open the doors of the Patent Office to would-be patent valid- exceptions, ity challengers. Nevertheless, for longstanding reasons of constitu- tional separation of powers, Congress was obliged to afford judicial review over the Patent Office’s adjudications mentalism for the Net? develop patent policy not solely in the Patent Office but with more input and coherence across a variety of relevant executive-branch agencies. middle ground in this literature is power a to set the of Patent Office proposals over to its allocate and findings scientific facts (if not determinations of of law or policy) relevant technical Megan M. La Belle, challenge in the courts, brought lenge in an the Patent administrative Office instead, validity and lost chal- in such the a party agency. be Would permitted, constitutionally, to seek judicial review? Current Federal Circuit precedent holds that an unsuccessful chal- lenger in administrative patent validity review must still meet stand- naturally raised the question of what to do with a party that would not originally have possessed standing to bring a patent validity 40268-nys_73-2 Sheet No. 33 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 33 40268-nys_73-2 40268-nys_73-2 Sheet No. 33 Side B 05/23/2018 07:56:14 81 , No. 17- challenger in successful As a result, it is entirely 82 The adverse agency decision 80 , 753 F.3d at 1261 (giving weight to the lack of any Momenta Pharms., Inc. v. Bristol-Myers Squibb Co. Of course, a challenger-appellee may still decline 85 Consumer Watchdog v. Wis. Alumni Research Found., 753 F.3d 1258 at 1261–62. The issue is now again before the Federal Circuit in a at 1250 (citing Virginia v. Hicks, 539 U.S. 113, 121, 123 (2003)) (inter- In this posture, the appellee is not “the party invoking 83 See Id. See Consumer Watchdog Id. Id. With a justiciable case or controversy thus established, said In both cases—an unsuccessful patent validity challenger that The reverse, however, is apparently not true. A different recent 84 80. 81. 82. 83. Pers. Audio, L.L.C. v. Elec. Frontier Found., 867 F.3d 84. 1246 (Fed. Cir. 85. 216ing requirements in order to appeal. NYU ANNUAL SURVEY OFThe AMERICAN Federal Circuit’s analysis suggests instead that LAWthe standing in- quiry for an [Vol. 73:201 appeal of this standing sort inquiry would that simply would govern revert a to district-court the lawsuit claratory for same judgment de- of patent invalidity. \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 16 22-MAY-18 11:21 decision of the Federal Circuit holds that a administrative PTAB review need not show standing to defend victory. its possible that a party could unsuccessfully challenge a patent in in- ter partes review, covered business method review, or post-grant re- view and then be unable to seek review in the Federal Circuit. the Federal Circuit, the appellee bears no added burden to demon- strate standing. not appear in the appeal—the Patent intervene in the appeal. Office This incentive lies in the stare decisis effect has an incentive to that the Federal Circuit’s decision may carry and in changes to patent law and policy that may result. The AIA has given the potential the Patent Office significant new interests in these questions. for its own reasons to appear in the appeal and defend its victory. cannot appeal and a successful patent validity challenger that will judicial review”—that party is the unsuccessful patent owner, who can plainly show “an alteration of tangible legal rights sufficiently . distinct . and . palpable that to is confer standing under Article III.” does does not, in itself, create an injury sufficient to create standing. (Fed. Cir. 2014). facts “that could form the basis for an infringement claim”—the traditionally suffi- cient condition for establishing an injury-in-fact in cases seeking declaratory judg- ment of patent invalidity). 2017). 1694 (Fed. Cir. argued Dec. 5, 2017) http://www.cafc.uscourts.gov/node/22675 [https://perma.cc/3HLK-WDBH]. currently pending case, nal quotation marks omitted). 40268-nys_73-2 Sheet No. 33 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 33 40268-nys_73-2 40268-nys_73-2 Sheet No. 34 Side A 05/23/2018 07:56:14 86 87 90 Skid- 89 Portola Packag- In re Likewise, for patent 88 Kulling, 897 F.2d 1147, 1149 In re III. PATENT PATENT VALIDITY A. Federal Circuit Primacy or somewhat weaker deference under the DBC, 545 F.3d 1373, 1377 (Fed. Cir. 2008); DH Tech., Inc. v. 91 In re EVOLVING EVOLVING JUDICIAL OVERSIGHT OF , doctrine See, e.g. Prior to the AIA’s enactment, the Federal Circuit’s primacy in The Federal Circuit’s supervision was pervasive. Whether on di- on Whether pervasive. was supervision Circuit’s Federal The To appreciate fully the policy interests that the Patent Office 86. 28 U.S.C. § 1295(a)(1) (2006). 87. 35 U.S.C. §§ 306, 315(b), 134(c). 88. § 141. 89. 28 U.S.C. § 1295(a)(4)(A). 90. 91. Chevron U.S.A., Inc. v. NRDC, Inc., 467 U.S. 837 (1984). patent law was difficult to overstate. For issued had exclusive patents, jurisdiction in all patent appeals from the the federal dis- court trict courts, be they about infringement or declaratory judgment. rect appeal of the agency’s denial of an application or in of grant agency’s the of litigation, district-court through review, eral a collat- a patent, the Federal Circuit’s review was de novo, giving no defer- ence to Patent Office interpretations of substantive patent law. ent Office policymaking. Given the agency’s expansive positions in other areas related to administrative patent validity review, exercis- ing intervenor power is a logical and natural Patent part Office campaign of of the policymaking. broader now has in the judicial reshaping of patent law, it is useful to con- sider how dramatically the judicial role has particu- change, that discusses part This validity. patent of questions changed in resolving larly in the context of appellate jurisdiction over PTAB review. The upshot is that PTAB review now represents a potent vehicle for Pat- Synergystex Int’l, Inc., 154 F.3d 1333, 1339 (Fed. Cir. 1998); and then exclusively to the Federal Circuit. This was a marked departure from ordinary principles of adminis- trative law, under which an agency’s interpretations of a statute that it administers should receive either Chevron strong deference under the The same was true of which ex were parte appealable first, and internally, within inter the partes Patent Office reexamination, 2018] PATENT OFFICE AS INTERVENOR 217 \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 17 22-MAY-18 11:21 applications, the court had where the exclusive agency had denied jurisdiction the inventor’s application. in all appeals ing, Inc., 110 F.3d 786, 788 (Fed. Cir. 1997); (Fed. Cir. 1990). 40268-nys_73-2 Sheet No. 34 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 34 40268-nys_73-2 40268-nys_73-2 Sheet No. 34 Side B 05/23/2018 07:56:14 R R 94 97 . L. 347 . EV DMIN Chevron A 187 (2006); . L. R . , 54 EV ASH . W . L. R A EO V G Agency Rules with the Force of in the Office.” 35 U.S.C. , 92 , 71 Recent Decisions of the United , 467 (2002); Thomas W. Merrill, . EV Step Zero proceedings 1959 (2013); Stuart Minor Benjamin & Benjamin Minor Stuart (2013); 1959 . EV . L. R The Changing Guard of Patent Law: in the Trenches note 94, at 297–98. ARV L. R L. H note 94, at 272 n.13 (“[G]iven the tendency of What the Act did change was adjudica- ARY supra 98 deference have been the subject of extensive de- Mead supra Instead, the agency has the authority to , 116 95 . & M & . M Skidmore Just as the agency’s backward-looking adjudica- W 96 269 (2007). , 54 54 , depending on the legal authoritativeness of the Introduction: Cass R. Sunstein, Chevron 92 . L.J. versus , Melissa F. Wasserman, EO Benjamin & Rai, G United States v. Mead Corp., 533 U.S. 218 (2001). The particular con- Who’s Afraid of the APA? What the Patent System Can Learn from Administra- Benjamin & Rai, Merck & Co. v. Kessler, 80 F.3d 1543, 1549–50 (Fed. Cir. 1996) (dis- Star Fruits S.N.C. v. United States, 393 F.3d 1277, 1282 (Fed. Cir. Doctrine: Rules and Standards, Meta-Rules and Meta-Standards The Federal Circuit’s patent exceptionalism on this key ad- Chevron See, e.g. See See See See , 95 see also 93 See generally The AIA was a mixed reform in this regard. It did not change doctrine 97. The “specific powers” provision of the Patent Act remains unchanged and 98. 94. 92. Skidmore v. Swift & Co., 323 U.S. 134 (1944). 93. 95. 96. 807 (2002). Mead . EV R still limits the power of the Office to “establish regulations, not inconsistent law, with which shall govern § the 2(b)(2)(A) (2012) (emphasis added). Notably, conduct earlier versions of the legislation of did propose substantive rulemaking authority for the agency. Patent Reform Act of 2007, S. 1145, 110th Cong. § 11. promulgate rules only on procedural issues substantive issues. and on enumerated rulemaking to be particularly subject to interest group pressures . . . the attractive- ness of substantive rulemaking authority is unclear.” (internal citations omitted)). which may be for the best. 218more NYU ANNUAL SURVEY OF AMERICAN LAW ministrative law issue was [Vol. 73:201 also the subject Adding of to scholarly this criticism. intrusive scope of review was conclusion the Federal that Circuit’s the Patent rulemaking Office authority. lacks any general substantive \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 18 22-MAY-18 11:21 agency agency interpretation or the oped. formality with which it was devel- States Court of Appeals for the District of Columbia Circuit (2003); Thomas W. Merrill & Kathryn Tongue Watts, Law: The Original Convention The Deference for the PTO the for Deference Arti K. Rai, tive Law tions were a rather poor means for advancing a Patent Office policy agenda, the agency’s forward-looking rulemaking was equally inef- fectual in view of the Federal Circuit’s jurisprudence. the state of affairs surrounding substantive rulemaking authority, tion. Administrative trials under the inter business partes method review, review, and covered post-grant review statutes pear to meet the standards all for formality and rigor that do suggest that ap- Congress, in the AIA, intended the agency to “speak with the force Adrian Vermeule, tours of cussing Chrysler Corp. v. Brown, 441 U.S. 281, 302 (1979)). bate. 2005); 40268-nys_73-2 Sheet No. 34 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 34 40268-nys_73-2 40268-nys_73-2 Sheet No. 35 Side A 05/23/2018 07:56:14 R R R R R def- note 94, deference supra Chevron 101 deference). Benjamin & 105 deference is driven by political by driven is deference Chevron Administrative Power in the Era of 102 Curiously and notably, how- Chevron 100 note 45. note 100, at 1581–90 (arguing that in such be entitled to supra 1563, 1582–83 (2016); Wasserman, supra likely L.J. UKE D A second approach—more brazen but less wide- B. PTAB Review as Policymaking notes 9–14 and accompanying text. notes 67–68 and accompanying text. 103 as well as academic criticism. , 65 , Nidec Motor Corp. v. Zhongshan Broad Ocean Motor Co., 868 Vishnubhakat, 104 See Benjamin & Rai, See supra through its adjudications. Cf. See, e.g. See supra at 1590. 99 Id. Instead, the Patent Office has asserted itself in other ways. One Both of these approaches are also best understood as a plat- 105.of critique theorized fully more a summarizes follows that discussion The 100. Stuart Minor Benjamin & Arti K. Rai, 102. 104. 99. United States v. Mead Corp., 533 U.S. 218, 229 (2001). 101. The core patentability conditions are the eligibility-, innovation-, and dis- 103. form for policymaking by the an- less Office Patent the makes broadly provisions nonappealability Patent Office. Reading the politi- greater to door the opens and Circuit Federal the to swerable AIA’s approach has been to take a broad view of the nonappealability pro- nonappealability the of view broad a take to been has approach visions of the inter partes, covered business method, and post-grant review statutes. we question whether the practice of expanding panels where the PTO is fied dissatis- with a panel’s earlier decision is the appropriate mechanism of achieving the F.3d 817 Inc., Sys., Creel Automated v. Inc. Grp., Indus. Shaw uniformity”); desired 1293, 1302–05 (Fed. Cir. 2016) (Reyna, J., concurring) (expressing concern with the Patent Office’s “claim to unchecked discretionary authority” and its refusal to provide reasoned bases for its decisions even where those decisions may be nonap- pealable by statute). the increasingly political style of decision-making that contemporary PTAB prac- tice reflects. F.3d 1013, 1020 (Fed. Cir. 2017) (Dyk, J., concurring) “[w]hile (expressing we concern recognize that the importance of achieving uniformity in PTO decisions, at 1977. closure-related requirements that inventions must satisfy in order to merit patent protection. cases, the Patent Office would 2018]of law” PATENT OFFICE AS INTERVENOR 219 \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 19 22-MAY-18 11:21 spread, at least so far—has been to politicize the PTAB’s adjudica- tions in order to reach specific outcomes in preferences of the political leadership accordance of the Patent Office. Both with of the these approaches are highly contested and are the subject of judi- cial concern ever, ever, the Patent Office thus far has declined to ask for erence with regard to core patentability requirements, Patent Stare Decisis Rai suggest that the agency’s refusal to seek to refusal agency’s the that suggest Rai to which it may be entitled either based on current agency practice or with relatively easy internal changes. cost and by anticipated hostility from the Federal Circuit, the Supreme Court, or both. 40268-nys_73-2 Sheet No. 35 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 35 40268-nys_73-2 40268-nys_73-2 Sheet No. 35 Side B 05/23/2018 07:56:14 112 ERKELEY B § 303(c) id. , 33 111 and inter partes reex- And for covered busi- 109 107 § 303(c) (2006); § 312(c) (Supp. V 2012). id. id. For inter partes reviews, the 106 These determinations, in turn, 108 The Non-Doctrine of Redundancy § 303(c) (2000); § 312(c) (2006); id. id. 1. Leveraging Nonappealability just as they now are for AIA proceedings. , Saurabh Vishnubhakat, 110 (forthcoming). The conclusion of Congress, however, appears to have See, e.g. These likelihood-of-success standards were intended to pro- To advance the expansive view of nonappealability, the Patent . L.J. 106. 35 U.S.C. § 303(a) (2006); MPEP § 2216 (8th ed. Rev. 7, July 2008); 35 107. 35 U.S.C. § 314(a) (2012). 108. § 324(a). 109. § 303(c) (1982); 110. § 312(c) (2000); 111. §§ 314(d), 324(e) (2012). 112. This is not to say that the lack of judicial review has no efficiency costs. A ECH mote efficiency by against the gauging waste of agency time credibility and resources with frivolous chal- up lenges. Similarly, immunizing front these initial determinations from and ju- guarding dicial review promotes constantly efficiency defending the screening by decisions that it sparing makes hundreds in or even the the thousands of petitions that come agency before it. from Office takes advantage of an efficiency measure that Congress has included in each administrative adjudication that For it ex has parte enacted. and inter partes reexaminations, patentability” of question new “substantial a that show to had review anyone requesting existed as to the patent in question. U.S.C. § 312(a); MPEP § 2616. T 220cal independence for the agency. Politicizing PTAB adjudication in NYU order ANNUALto reach particular outcomes in individual SURVEY cases, meanwhile, OFcan more AMERICAN directly implement policy preferences about how the pat- LAWent laws should [Vol. apply 73:201 to certain tries, technology certain types areas, of litigants, certain and so on. indus- \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 20 22-MAY-18 11:21 been that the benefits from committing these decisions to agency discretion would likely outweigh the costs. petitioner must show a “reasonable likelihood” of prevailing as to at least one of the challenged patent claims. ness method and post-grant reviews, the petitioner must show that patent challenged the of one least at that not” than likely “more is it claims is, indeed, unpatentable. amination were final and nonappealable for ex parte (2012). lack of judicial correction may, for example, bring countable about decision-making by unprincipled the or agency and unac- generate inefficiency in the longer term. 40268-nys_73-2 Sheet No. 35 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 35 40268-nys_73-2 40268-nys_73-2 Sheet No. 36 Side A 05/23/2018 07:56:14 The 122 In 2012, petitioner Garmin at 2140. 119 Id. Accordingly, appellate jurisdiction re- In the fourth, the Federal Circuit has 113 117 Cuozzo appealed to the Federal Circuit, Based on its initial screening, the PTAB Faced with this bifurcated structure—where 121 120 114 In the third, the agency awaits a decision by the In the second, the agency just lost in the en banc en the in lost just agency the second, the In 116 115 , Versata Dev. Grp., Inc. v. SAP Am., Inc., 793 F.3d 1306 (Fed. Cir. , 136 S. Ct. 2131. , 136 S. Ct. at 2138. at 2138–39. nonappealability the that unsuccessfully, argued, also Cuozzo 2139. at See, e.g. Cuozzo Cuozzo Id. Id. 118 The first context is the requirement that inter partes review Some Some judicial review must remain, of course, to ensure ac- 118. 113. This is administrative law’s familiar presumption in favor of judicial re- 114. §§ 319, 329. 115. 116. Wi-Fi One, L.L.C. v. Broadcom Corp., 837 117.F.3d 1329 (Fed. Cir. 2016). SAS Inst., Inc. v. ComplementSoft, L.L.C., 825 F.3d 1341 (Fed. Cir. 119. § 312(a)(3). 120. 121. 122. petitions must plead their arguments “with the particularity,” petition may not or be considered. else countability countability in the agency. 2016). view when construing statutes, including statutes that purport to limit or preclude review. Cuozzo Speed Techs., L.L.C. v. Lee, 136 S. Ct. 2131, 2140 (2016). texts: three pertaining to inter partes review and a fourth, discussed in the next section, pertaining to covered business method review. In one instance, the agency defended its practice in the Court and won. Supreme Federal Circuit. 2018] PATENT OFFICE AS INTERVENORinitial screening decisions are unreviewable tions are reviewable—an but agency whose aim is to assert merits itself against adjudica- a supervising court has self-evident incentive to characterize issues as screening-related rather than adjudication-related. The Office has Patent already 221 taken this approach in at least four major con- \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 21 22-MAY-18 11:21 Supreme Court yet again. arguing that the PTAB was wrong to grant review because Garmin’s petition had not been pled with the requisite particularity. granted review on certain of the patent’s claims invalid and on found the them merits. International challenged the validity of a Speed patent Technologies. held by Cuozzo 2015); SightSound Techs., L.L.C. v. Apple, Inc., 809 F.3d 1307 Blue Calypso, (Fed. L.L.C. Cir. v. Groupon, 2015); Inc., 815 F.3d 1331 (Fed. Cir. 2016). consistently held against start. the Patent Office position from the Supreme Court agreed with the Patent Office that the particularity of pleading, though it may implicate adjudication-related questions mains over the eventual adjudications that the PTAB makes on the merits of each case. provision of the inter partes review statute is a bar only to interlocutory review, not to all review of PTAB screening decisions. 40268-nys_73-2 Sheet No. 36 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 36 40268-nys_73-2 40268-nys_73-2 Sheet No. 36 Side B 05/23/2018 07:56:14 In , 878 124 on reh’g en banc The potential of majority rejected 129 en banc rehearing, the Patent Office attracted a good deal of ami- Id. The Court-Agency Allocations of Power and the 131 Cuozzo en banc 132 On (May 5, 2017), https://patentlyo.com/patent/2017/ , 851 F.3d 1241 (Fed. Cir. 2017), 128 -O The PTAB rejected Wi-Fi’s arguments, granted re- ATENTLY and commentary. P , Brief of Amici Curiae Professors of Patent and Administrative , Saurabh Vishnubhakat, —and therefore as unreviewable. Wi-Fi argued that Broadcom’s challenge was barred 126 130 125 at 1332–33. at 1333. at 2141–42. See, e.g. See, e.g. Id. Id. Id. Id. Cuozzo Cuozzo, vacated on reh’g en banc Wi-Fi appealed to the Federal Circuit and argued that the 123 The second context is the requirement that a PTAB petitioner 130. 131. 126. 127. 128. 129. En Banc Brief for Intervenor Michelle K. Lee, Director, United States 125. Wi-Fi One, L.L.C. v. Broadcom Corp., 837 F.3d 1329, 1332 (Fed. Cir. 123. 124. § 315(b). The one-year bar attaches not only to the petitioner but also to 132.(en 2018) Cir. (Fed. 1364 F.3d 878 Corp., Broadcom v. L.L.C. One, Wi-Fi 127 mination for which Congress intended to foreclose appeals”). Law in Support of Neither Party, Wi-Fi One, L.L.C. v. Broadcom Corp., 1364 878 (Fed. F.3d Cir. 2018) (Nos. 15-1944, 15-1945, 15-1946), 2017 U.S. Fed. Cir. Briefs LEXIS 29. F.3d 1364 (Fed. Cir. 2018). Patent and Trademark Office at 9, Wi-Fi One, L.L.C. v. Broadcom Corp., 878 F.3d 1364 (Fed. Cir. 2018) (Nos. 15-1944, 15-1945, 15-1946), 2017 WL (arguing 1132930, that at “[s]ection *9 315(b) exemplifies the kind of institution-specific deter- Limits of 2016), that has previously been sued in U.S. district court for infringing a patent must seek inter partes review on the relevant patent within one year, or else the inter partes review may not be instituted. because Broadcom was in privity with entities whom Wi-Fi had sued more than one year earlier in U.S. district court for infringing the same patent. any of its privies or real parties in interest. cus briefing 222 about quality or sufficiency of evidence, means little more than that NYUthe ANNUAL petition SURVEY deserves review—a OF quintessentially issue. AMERICAN screening-related LAW [Vol. 73:201 \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 22 22-MAY-18 11:21 view, and found certain of the patent’s claims invalid on the its. mer- PTAB acted outside its authority by granting the petition of a statu- torily time-barred party. 05/agency-allocations-limits.html [https://perma.cc/78GD-HTWM]. banc). the case to define the reach of the Patent Office position, concluding that applications of the one- year time remain reviewable. 2013, Broadcom Corp. challenged the validity of a patent held Wi-Fi by One. cast the issue as one of initial screening, not adjudication—just as it had in 40268-nys_73-2 Sheet No. 36 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 36 40268-nys_73-2 40268-nys_73-2 Sheet No. 37 Side A 05/23/2018 07:56:14 R Id. note 131. and likely con- , in turn, is a case The PTAB’s final supra 135 Cuozzo The Patent Office ar- 136 Wi-Fi One was about the necessary quali- The decision to enforce the time the enforce to decision The 139 Cuozzo note 46; Vishnubhakat, supra SAS Inst., Inc. v. Lee, 137 S. Ct. 2160 (2017). The PTAB granted review on nine of the 134 , 825 F.3d at 1352. Unlike the particularity requirement and the one- Understood in light of that screening power, said the 133 Vishnubhakat, The PTAB’s practice of granting-in-part and denying-in-part rests on 137 Id. SAS Inst. Id. See 138 cert. granted sub nom. This trilogy of cases reveals a progression of increasingly bold The The third context is the requirement that the PTAB, where re- 135. 133. § 318(a). The provision also requires the decision to address any new 134. SAS Inst., Inc. v. ComplementSoft, L.L.C., 825 F.3d 1341, 1346 (Fed. Cir. 136. 137. Brief for the Federal Respondent at 13–14, SAS Inst., Inc. v. Matal, No. 138. 139. ties of the petition itself, and the argument that the issue was prima- was issue the that argument the and itself, petition the of ties it if even plausible was adjudication than rather screening about rily sometimes leads to disagreeable results. about the court-agency allocation of power to decide patent validity cases, an allocation that rests in time bar for inter partes review. significant part on the one-year agency claims about what should be considered screening-related and judicially unreviewable. view view is granted and not dismissed, must issue a sion final addressing written the deci- merits of “any patent claim challenged by petitioner.” the 2016), claims that the patent owner may have added during the proceeding. 2018] PATENT OFFICE AS INTERVENOR 223 \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 23 22-MAY-18 11:21 Patent Office, the statute that governs final written decision address need only the review. claims on which the PTAB actually granted year time bar, this requirement lenger rather tends than to the patent disadvantage owner. In the 2014, lenged SAS chal- Institute chal- the ComplementSoft. validity of 16 claims in a patent held by gued in the Supreme Court, as it had in the Federal Circuit below as intervenor, that the statutory obligation regarding completeness in the final written decision screening. is constrained by the initial PTAB bar is not primarily about the necessary qualities of the petition but rather about extrinsic conditions that bear on the PTAB’s authority to proceed. This is at least a closer case than claims but denied review on the seven others. written decision addressed the merits only of the patent claims on which the PTAB granted review—not on all the claims “challenged by the petitioner” in the original petition. a Patent Office rule, 37 C.F.R. § 42.108 (2017), that interprets 35 U.S.C. §to permit this practice. 314(a) 16-969 (U.S. Sept. 5, 2017), 2017 WL 3948437, at *13–14. 40268-nys_73-2 Sheet No. 37 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 37 40268-nys_73-2 40268-nys_73-2 Sheet No. 37 Side B 05/23/2018 07:56:14 Wi-Fi Sight- , 143 , , agreeing Cuozzo Versata A panel of the Fed- 145 . Versata v. SAP is about adjudication-re- supports this view, concluding in a 9–4 The enabling statutory provision au- SAS Institute Wi-Fi 142 141 Blue Calypso v. Groupon all pertain to inter partes review, though they decision in Meanwhile, and decision. Wi-Fi One, L.L.C. v. Broadcom Corp., 878 F.3d 1364, 140 144 . , en banc 2. Defining Covered Business Method Patents Cuozzo SAS Institute Cuozzo An interesting postscript to this nonappealability-based ap- From the start, the Patent Office has argued that PTAB deter- , and 142. § 18(d)(2). 143. Brief for the Intervenor, Director of the United States Patent and Trade- 144. Brief for the Intervenor, Director of the United States Patent and Trade- 145. Brief for Intervenor, Director of the United States Patent and Trade- 141. Leahy-Smith America Invents Act, Pub. L. No. 112-29, § 18(d)(1), 125 140. The mark Office at 16–17, Versata Dev. Grp., Inc. v. SAP Am., Inc., 793 F.3d 1306 (Fed. Cir. 2015) (No. 14-1194), 2014 WL 1878618, at *16–17. mark Office at 26–27, SightSound Techs., (Fed. Cir. L.L.C. 2015) (Nos. v. 15-1159, 15-1160), Apple, 2015 WL Inc., 1814625, at 809 *26–27. F.3d 1307 mark Office at 16–17, Blue Calypso, L.L.C. v. Groupon, Inc., 815 F.3d 1331 (Fed. Cir. 2016) (Nos. 15-1391, 15-1393, 15-1394), 2015 WL 4400825, at *16–17. 1374–75 (Fed. Cir. 2018) (en banc). Stat. 284, 331 (2011). One do directly affect the other AIA proceedings given the identical or highly similar provisions that govern nonappealable screening, es- toppel, and other structural features nisms. in all Yet three review the additional mecha- and covered express policymaking provision. business Covered method review is available only for patents that satisfy the AIA’s def- business method statute inition of an eligible patent. includes an majority that applications of the one-year time bar are judicially reviewable even in light of the minations of whether patents satisfy the definition are nonappeala- ble—just as PTAB determinations of whether to grant review as to the validity of those patents is nonappealable. The agency advanced this argument in multiple cases, including proach to policy also bears mention. The trilogy of 224 trary to NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:201 \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 24 22-MAY-18 11:21 thorizes and commands the elaborate on this Director definition. to promulgate rules that eral Circuit first ruled against the Patent Office in lated lated obligations Undoubtedly, one can recast the issue in terms that of initial screening power and defend the agency’s practice on that Congress basis, but this over- imposed all line of argument suggests a on marked preference on the the Patent part of Office the for resisting judicial review possible. of PTAB. the PTAB where Sound v. Apple that the determination of whether to grant review is immune from 40268-nys_73-2 Sheet No. 37 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 37 40268-nys_73-2 40268-nys_73-2 Sheet No. 38 Side A 05/23/2018 07:56:14 , 148 Versata , that deter- consideration. Versata , but possibly sens- Secure Axcess v. PNC , reached the same SmartFlash v. Samsung en banc Versata Secure Axcess Of the twelve judges who partici- 147 How the Federal Circuit responds to They argued instead that the 151 denial in 149 3. Stacking PTAB Panels rehearing. en banc . deference. en banc en banc at 1004 (Lourie, J., dissenting). at 1009–10 (Dyk, J., dissenting). at 1010–11 (Dyk, J., dissenting). Subsequent panels, bound by Id. Id. Id. 150 Skidmore 146 , where a materially identical nonappealability provision was denied The other major way in which the Patent Office has asserted Following the However, However, in a significant split, the court in 147. Secure Axcess, L.L.C. v. PNC Bank Nat’l Ass’n, 859 F.3d 998 (Fed. Cir. 148. 149. 150. 151. Brief for Intervenor, Director of the United States Patent and Trade- 146. 793 F.3d 1306, 1319 (Fed. Cir. 2015) (rejecting the contention that the moreover, it is sensible, practical, and longstanding”—and deserv- ing of itself is the controversial practice of panel stacking. Panel stacking the agency suggested that its interpretation is “consistent with the text, legislative debate history, and purpose of the statute, and, 2017). mark Office at 23–24, SmartFlash, L.L.C. 2451, v. 16-2452, Samsung 16-2455, 16-2457, Elecs. 16-2458, Am., 17-1056, 17-1102, Inc., 17-1104, Nos. 17-1109, 17- 16- 1110, 17-1111, 17-1833, 17-1834, 17-1835, 17-1836, 17-1847, 17-1837, 17-1846 (Fed. Cir. Sept. 27, 2017), 2017 WL 4402106, at *23–24. court may not review whether method patent). a given patent is a qualifying covered business conclusion conclusion until the entire Federal whether the definition Circuit of a this covered business method year might be re- considered considered And of the Hughes—further dissented from the holding five of dissenters, minations three—Judges of whether patents Dyk, meet the Wallach, covered definition business are method reviewable. and 2018] review but holding that the definitional determination of a covered business method patent is reviewable after a final decision on merits. the PATENT OFFICE AS INTERVENOR 225 \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 25 22-MAY-18 11:21 this request for interpretive deference may do much to shape agency’s the continued use of the AIA nonappealability provisions as a platform for its policy agenda. ing a receptive audience, the Patent Office has time, expressly now, sought deference for for its interpretation the of the first statu- tory covered business method definition. In pated, five dissented from the denial of panel decision did not survive Cuozzo the Supreme Court’s holding at work. in Bank 40268-nys_73-2 Sheet No. 38 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 38 40268-nys_73-2 40268-nys_73-2 Sheet No. 38 Side B 05/23/2018 07:56:14 The The 154 152 , even if Chevron , the Federal Circuit , the question arose during 155 Nidec v. Zhongshan Similarly, in Yissum Research v. Sony Corp. 153 deference—though only on procedural matters, such as at 47:35. at 25:40. where the agency’s interpretation of the inter partes re- Id. Id. The longer-term benefit to Patent Office policymaking from The relationship of the practice of panel stacking to the 152. Oral Argument at 47:20, Yissum Research Dev. Co. of the Hebrew Univ. 153. 154. Oral Argument at 25:27, Nidec Motor Corp. v. Zhongshan Broad Ocean 155. Yissum Chevron ized applications of patent law that are specific to a given technol- ogy, a given industry, a given type patent of owner, challenger, or a any given type other of attribute sorts of policy of vindications are short-term gratifications interest. at best and However, these potentially inappropriate distortions of the adjudicatory process at worst. panel stacking would be strong deference under the relevant opinions themselves were non-precedential. The Pat- ent Office has, indeed, used the practice already to argue in favor of in agency’s policy agenda is twofold. In a direct Patent sense, Office the leadership to ability stack of the PTAB with additional judges until the desired outcome is reached allows the agency to policy impose preferences in a great many ways. These include particular- of Jerusalem v. Sony Corp., 626 F. App’x 1006 (Fed. Cir. 2015) (mem.) (Nos. 15- 1342, 15-1343), http://oralarguments.cafc.uscourts.gov/default.aspx?fl=2015-1342 .mp3 [www.perma.cc/S6AQ-C6EE]. Motor Co., 868 F.3d ments.cafc.uscourts.gov/default.aspx?fl=2016-2321.mp3 [https://perma.cc/X74B- 1013 (Fed. Cir. 6QY6]. 2017) (No. 16-2321), http://oralargu- 226is a practice NYU whereby PTAB ANNUAL the decisions Patent SURVEY it Office OF leadership finds three-judge AMERICANpanel responds in undesirable order to create to LAWa by majority for the Office’s expanding de- sired the outcome. The agency’s motivation original for this [Vol. has been 73:201 candidly political. In oral argument whether, in situations where power the engaged has] Office Patent “[the outlier, an be to peared a PTAB decision ap- to reconfigure the panel so as to get the result [it wants].” \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 26 22-MAY-18 11:21 questioned whether uniformity, even if desirable and desired by the PTAB, could legitimately “where be the PTAB can achieved look at through a don’t like that, prior let’s jump panel back decision in there and and change that?’” stacking say, ‘Well we tor “trying to ensure that her policy position is being the enforced panels.” by question went unanswered amid other questions about how tional addi- PTAB judges are assigned. Patent Office confirmed the practice and defended it as the Direc- 40268-nys_73-2 Sheet No. 38 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 38 40268-nys_73-2 40268-nys_73-2 Sheet No. 39 Side A 05/23/2018 07:56:14 R 159 Blue defer- , and . In short, the latitude . And in the deference). Chevron . In the arc of 160 Nidec or Chevron SightSound and , purposes—but it does SmartFlash . In the debate over non- Skidmore SAS Institute Yissum Versata Chevron , and The Patent Office argued that its that argued Office Patent The 156 amicus curiae note 100, at 1581–84 (summarizing the debate The agency argued that it had met this Wi-Fi One , 158 supra Speaking consistently with input from the 157 Cuozzo Part II.B.2. , 626 F. App’x. 1006. C. Patent Office Intervention in PTAB Appeals at 19–20. Id. Yissum See supra deference. and is currently an intervenor in It is in this broader policymaking framework of conducting 157. 158. Benjamin & Rai, 156. Brief for Intervenor, Director of the United States Patent and Trade- 159. 160. rather than, for example, as mark Office at 2, 9–11, Yissum Research Dev. Co. of the Hebrew Univ. of Jerusalem of Univ. Hebrew the of 9–11,Co. 2, Dev. at Research Office Yissum mark v. Sony Corp., 626 F. App’x 1006 (Fed. Cir. 2015) (mem.) (Nos. 15-1342, 15-1343), https://www.patentspostgrant.com/wp-content/uploads/sites/34/images/Interve norbrief.pdf [https://perma.cc/337H-5FK4]. over whether “adjudications overseen by agency heads and/or treated as preceden- as treated and/or heads agency by overseen “adjudications whether over tial by the agency” are the only adjudications that merit Still, as with the covered business method definition, 2018]issue. at was statute joinder view PATENT OFFICE AS INTERVENOR 227 \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 27 22-MAY-18 11:21 diligent use of panel-stacking, coordinated by the Director to gener- to Director the by coordinated panel-stacking, of use diligent ate a uniform body of case outcomes, was a way of speaking consist- ently on the issue, such that its determinations ought to be granted Chevron agency head herself, in turn, may or may not be necessary in order to “speak with the force of law” for appear to be sufficient. deed, in many of the cases already discussed as part of Office’s the Patent strategy, it was as intervenor that the agency entered— appealable screening in inter partes review, the Patent Office an was intervenor in cases regarding the definition of a covered business method patent, the Patent Office was an intervenor in Calypso of the Patent Office to seek deference, or otherwise to shield itself from judicial scrutiny in service of its policymaking agenda, is likely to change as and when the feedback. Federal Circuit continues to give its PTAB review, with the Patent Office leveraging and enlarging im- munity from judicial review and seeking ence, with the stark potential agency’s intervenor power should be for evaluated and understood. In- politicized outcomes, that the ment, disposing of the case instead with a summary affirmance. standard. Even so, the Federal Circuit declined to reach the argu- cases where panel-stacking came to light at oral argument, the Pat- ent Office was an intervenor in in feature central a both been has appeals Circuit Federal in intervention 40268-nys_73-2 Sheet No. 39 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 39 40268-nys_73-2 40268-nys_73-2 Sheet No. 39 Side B 05/23/2018 07:56:14 , 65 The any reex- 162 229, 229 . If this is EV 166 . L. R LA F , 65 : The PTO as Prime Mover Chevron to the court in writing the grounds for the it raised analytical and empirical In Golden’s account, this structure 164 165 The Accidental Agency? shall submit Working Without 539, 543 (2012) (indicating only a passing reference to reference passing a only (indicating (2012) 543 539, A Guide to the Legislative History of the America Invents Act: . B.J. . 163 IR . C . , Sapna Kumar, ED F , the Director Joe Matal, at 1683. , 21 , Id. See, e.g. See 1657, 1682–83 (2016). Previously, the agency was a mandatory co-appellee in all 167 Although this statutory revision was virtually unremarked in This is fitting, for the statutory power of the Patent Office to 161 L.J. 166. 167. 164. 161. Leahy-Smith America Invents Act, Pub. L. No. 112-29, 162. § 7(c)(3), 35 125 U.S.C. § 143 (2006) (requiring that, in “an ex parte case or 163. 35 U.S.C. § 143 (2012) (providing that the Director “shall have the right 165. John M. Golden, UKE the AIA’s legislative history, reviews). Stat. 284, 314–15 (2011) (codified as amended at 35 U.S.C. § 143 (2012)). amination case decision of the Patent and Trademark Office, addressing all the issues involved in the appeal” (emphasis added)). to intervene,” but not the obligation, in appeals from administrative patent validity D 228 how the NYU Patent ambitions. ANNUAL Office SURVEY has OF asserted AMERICAN its LAW post-AIA policymaking intervene in [Vol. appeals 73:201 from the PTAB AIA. was itself a creation of the \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 28 22-MAY-18 11:21 Federal circuit appeals from a reexamination or simply as an appel- lee from a refusal to proceed with ex parte reexamination. (2013) (arguing that the Federal Circuit’s jurisprudence desire reveals to an act as institutional “the de facto administrator of the Patent Act”). tions of Federal Circuit primacy. It also powers that the Patent Office invites does have, if the agency is robust to advance use of the its policymaking agenda at all, because the Federal Circuit is likely to have its policy. own strongly held views regarding proper patent an accurate view of Congressional intent, it reinforces pre-AIA no- the provision in Senator Kyl’s remarks during floor debate in March 2011). intervene, using language that signals at least some discretion the Patent for Office. questions among commentators. As a matter of institutional struc- ture, for example, John Golden observed that the power vene to inter- on appeal in independent adjudicatory the review for Federal the Director to Circuit—instead supervise the PTAB—is of an important a deviation from power the standard APA of concep- tion of formal adjudication. AIA removed reexaminations from the set agency of was obliged cases to in appear and which added the the current authority to suggests that “Congress arguably placed the Federal Circuit in the authoritative position analogous to that of ‘the agency.’” Part II of II of II Part 40268-nys_73-2 Sheet No. 39 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 39 40268-nys_73-2 40268-nys_73-2 Sheet No. 40 Side A 05/23/2018 07:56:14 These 240, 253 Y ’ 170 OC Meanwhile, . S 171 169 FF O RADEMARK . & T AT Dmitry Karshtedt recently spec- 168 J. P Federal Circuit Appeals from the PTAB: A New , 95 319, 342 n.129 (2017). . L. Acceptance Instead of Denial: Pro-Applicant Positions at the ECH . & T CI B.U. J. S Across these 96, the party that challenged patent validity in the Moreover, Moreover, given the agency’s discretion to intervene on a case- To that end, a comprehensive review of appeals from PTAB 168. David L. McCombs et al., 170. The converse case would be that the patent owner successfully defended 171. The agency submitted briefing in 93 disputes; the rest were terminated 169. Dmitry Karshtedt, , 23 PTAB below participated in the appeal (70.8%) and was either unwilling in or unable to participate in a a total total of 68 of disputes 28 disputes (29.2%). Across the challenger prevailed below same in the PTAB and 96 came to the appeal disputes, to the patent defend its victory in 77 disputes vailed in the (80.2%); PTAB in only 19 disputes the (19.8%). Given that the Pat- patent owner pre- ent Office appeal always supported the PTAB, these findings by-case by-case basis, it was unclear when and based upon what criteria the agency would exercise its power. Game or Just the Same Old Practice? 2018] PATENT OFFICE AS INTERVENOR 229 \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 29 22-MAY-18 11:21 its patent in the PTAB, the losing petitioner appealed, and the patent clined owner de- to appear. In such a case, patentee who had no interest in defending its victory. Expending resources on this the Patent Office would be standing scenario seems in highly unlikely. for a early. (2013). PTO of some larger structural value associated with administrative adju- dication—never in opposition to the PTAB’s stance. points are salient because a meaningful discussion of how the Pat- ent Office can or should intervene must begin with a realistic pic- ture of how the agency has actually done so until now. decisions where the Patent Office appeared as an appellate venor revealed inter- 145 docketed Federal Circuit cases. Taking consoli- dations into account, these where the Patent Office intervened. cases Every intervenor brief that the reflected 96 agency filed was distinct in full or partial defense of the PTAB’s position disputes or ulated that, “[g]iven that the typical outcome of a post-issuance pro- post-issuance a of outcome typical the that “[g]iven that, ulated ceeding is patent invalidation, the PTO’s participation in Circuit Federal appeals means that the agency will more or often than not argue against the patentee whenever it intervenes.” virtually certain that the agency would only ever intervene half on of be- an absent prevailing petitioner—a challenger that success- fully obtained an invalidation in the PTAB and is either unwilling or unable to defend against the patent owner’s appeal. where the agency’s purpose in intervening is to step in sent for party an to ab- ensure fully adversarial vetting of the issues, it seems 40268-nys_73-2 Sheet No. 40 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 40 40268-nys_73-2 40268-nys_73-2 Sheet No. 40 Side B 05/23/2018 07:56:14 R 173 then, where the patent 172 IV. the case in which the Federal Circuit 174 , Supplemental Brief for Intervenor, Knowles Elecs., L.L.C. v. note 170 and accompanying text. See supra See generally THE CONSTITUTIONALITY OF INTERVENTION Until now, Patent Office decisions to intervene have been These descriptive tabulations confirm the intuition that taking Of the 68 disputes where the PTAB challenger went on to par- 172. 173. Case data on USPTO intervention in the Federal Circuit was gathered 174. shaped entirely by the agency’s policy agenda under the broad as- sumption that the agency was not legally constrained, let alone con- stitutionally constrained, assumption forms in the basis Knowles Electronics v. Matal those for the Patent decisions. Office’s position Indeed, in that combination of defending PTAB decisions and standing in for ab- sent validity challengers suggests that it is a Patent that findings Office of priority invalidity be affirmed, but not necessarily findings of validity. specific positions in Federal Circuit appeals from PTAB has, decisions indeed, been a meaningful part of how the Patent Office uses PTAB review as a policymaking vehicle. Policy-relevant features of agency intervention include a preference for defending the PTAB’s decisions, for intervening even when adversary parties are both par- ticipating, and for standing in for validity challengers that are sent ab- on appeal, but not for absent patent owners. Notably, the using Docket Navigator. Data about the agency’s positions was hand-coded its from briefs in those cases and is on file with the author. Matal, No. 16-1954, 2017 WL 3399631 (Fed. Cir. July 31, 2017). where the patent challenger lost in the PTAB and was then unwill- ing or unable to appeal. As expected, 230 confirm Karshtedt’s conjecture: the agency did, indeed, NYUintervene against ANNUALthe patentee far more SURVEY often than not, by OFa 4:1 ratio. AMERICAN LAWticipate in the appeal, the PTAB challengers came to appeal as win- [Vol. 73:201 ners in a total of 49 disputes (72.1%); only in 19 disputes (27.9%) did they come to appeal having lost in the PTAB. Notably, of the 28 remaining disputes, where the PTAB challenger did not participate in the appeal, every dispute had been a victory for the challenger. In other words, the Patent Office never intervened in an appeal \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 30 22-MAY-18 11:21 has finally inquired about those constraints. Based on the observed issues the to turns now part this intervention, Office Patent of usage challenger was absent from stepped in, it was always after a validity the challenge had succeeded in appeal and the PTAB below. These the findings are summarized Patent in Table 1. Office 40268-nys_73-2 Sheet No. 40 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 40 40268-nys_73-2 40268-nys_73-2 Sheet No. 41 Side A 05/23/2018 07:56:14 To have an injury an have To Recent scholarship 179 175 . To trace the injury to 180 which governs intervention in the , Knowles The difficulty of reconciling 24 178 . P. IV . R. C Patent Office authority under section 143 ED F 177 A. Standing to Intervene art. III, § 2, cl. 1. . A party that lacks necessary standing must be ex- , Warth v. Seldin, 422 U.S. 490, 498–99 (1975) (explaining that ONST 176 Knowles Elecs., L.L.C. v. Matal, No. 16-1954 (Fed Cir. June 30, 2017) See U.S. C See, e.g. The need for standing to participate in a federal court pro- Standing generally requires the existence of an injury, the 175. 178. A third potential detail, the distinction that the Patent Office can inter- 177. 179. Spokeo, Inc. v. Robins, 136 S. Ct. 180.1540, 1547 (2016). Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992) (citations omitted). 176. ceeding is a familiar application of Article III’s “case or controversy” or “case III’s Article of application familiar a is ceeding requirement. 2018]of constitutional standing raised in PATENT OFFICE AS INTERVENOR 231 \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 31 22-MAY-18 11:21 cluded, and the absence of standing bars the court jurisdictionally from hearing the case. “the standing question is whether the plaintiff has alleged such a personal stake in the outcome of the jurisdiction”). controversy as to warrant his invocation of federal-court vene in appeals rather than in courts of first instance, is actually largely irrelevant. The principles underlying implicates two important details of the and somewhat commentary discordant in law this area: the and the rights relationship of intervenors between and the side standing of the dispute on which the standing inquiry is directed. and Supreme Court case law suggest that indeed, have the to show Patent standing in order Office to exercise may, its intervention authority. Standing doctrine and limit the administrative substantive positions law that constraints the venor. Under agency certain conditions, can these obligations and take constraints as inter- may also have influence on intervention by peals from private PTAB parties reviews of in patent validity. ap- traceability of the injury sability of the to injury by the relief that is sought. particular conduct, and the redres- standing with intervention—specifically intervention as a matter of right—is, ironically, that they are analytically quite similar. U.S. district courts, may also apply in the U.S. courts of appeal. UAW v. 382 Scofield, U.S. 205, 217 n.10 (1965). is to suffer “an invasion of a legally protected crete interest” and in a particularized” “con- manner and with not “actual conjectural or or hypothetical” imminent, timing. particular conduct, meanwhile, is to attribute causation, naturally raises inferential difficulties when multiple possible causes and this (per curiam) (order requesting .com/media/2017/06/KnowlesOrder.pdf [https://perma.cc/7VXQ-LHK2]. supplemental briefing), https://cdn.patentlyo 40268-nys_73-2 Sheet No. 41 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 41 40268-nys_73-2 40268-nys_73-2 Sheet No. 41 Side B 05/23/2018 07:56:14 ROCEDURE P 2525, 2542 . EV For example, 188 L. R RACTICE AND P ORDHAM F Otherwise, the judicial ac- EDERAL The mere prospect of stare F , 85 24(a)(2) is also salient for private- 182 , 189 . . P. IV It’s Time for an Intervention!: Resolving the Conflict . R. C ED RIGHT ET AL F Like the redressability requirement, this W 187 Like the traceability requirement, this calls Part IV.C. LAN 24(a)(2) (requiring the intervenor to “claim[to intervenor the (requiring 24(a)(2) interest an ] 186 To show a likelihood of redress is similarly an A . P. . 183 181 IV See infra Like the injury requirement of standing, the inter- at 560–61at parties third of action independent the e.g., (discussing, HARLES C . R. C R. . 185 at 561–62. at 575. (requiring the intervenor to be “so situated that disposing of the ac- (limiting the court’s obligation to allow intervention where “existing ED See id. See Id. Id. F Id. Id. Intervention of right first requires an interest in subject of The right to intervene under Federal Rule of Civil Procedure One difficulty with these doctrinal overlaps is that a case’s facts 184 181. 182. 183. 184. The comparison to 185. 189. 7C 186. 187. 188. As Gregory Manring has argued, neither inquiry “can subsume the What Constitutes a Sufficient Interest”). 24 reflects similar concerns, and this similarity is helpful to consider to helpful is similarity this and concerns, similar reflects 24 when evaluating how Article III standing might fied. be deemed satis- not before the court). venor’s interest reflects a stake in the dispute. Intervention of right also requires a risk that the interest will be impaired by the disposi- tion of the lawsuit. for a causal connection between the interest at stake and the conse- quences of denying participation. Finally, intervention of right re- quires a comparably through intervention. improved ability to protect the interest § 1908.1 (3d ed. 2017) (discussing “Intervention under the 1966 Amended Rule— 232 may be at work. NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:201 \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 32 22-MAY-18 11:21 the action. party intervenors. also demands a showing that the relief sought—intervening in the action—will make a meaningful difference with regard to the inter- est at stake. may satisfy one set of inquiries but not the other. exercise exercise in causation, for the remedy about sought an must end actually to the bring relevant injury. tion urged by the party is animated, impermissibly, lized grievance.” by a “genera- an injury for standing purposes must be fairly specific and personal- ized, but the interest at stake for an intervenor may be impaired in fairly broad fashion and still qualify. (2017). interest”). relating to the property or transaction that is the subject of the action”). tion may as a practical matter impair or impede the movant’s ability to protect its parties adequately represent that interest”). other.” Gregory R. Manring, Note, Between Rule 24(a)(2) and Article III Standing 40268-nys_73-2 Sheet No. 41 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 41 40268-nys_73-2 40268-nys_73-2 Sheet No. 42 Side A 05/23/2018 07:56:14 R 481 last L.J. or po- 191 UKE D 1411, 1428–40 . Elizabeth Zwick- , 67 EV See 193 L. R overruled on other grounds AME This rule also permits D 194 On the other hand, it is OTRE 192 note 193. The term “one-plaintiff N doctrine” may also refer to the sub- , 84 supra Town of Chester v. Laroe Estates Doctrine Solved the Debate?: The Relationship Bowsher Lockyer v. United States, 450 F.3d 436 (9th Cir. One Good Plaintiff Is Not Enough Bowsher 2017, 2037–38 (2007). ex rel. . L.J. , Timmermans, EO Has the G ; United States v. Albert Inv. Co., 585 F.3d 1386 (10th Cir. id. See, e.g. , 95 , Massachusetts v. EPA, 549 U.S. 497, 518 (2007); Bowsher v. , , California , Stone v. First Union Corp., 371 F.3d 1305, 1310 (11th Cir. 2004); Cir. (11th 1310 1305, F.3d 371 Corp., Union First v. Stone , To this, the Court in as can the prospect of future adverse litigation McConnell v. FEC, 540 U.S. 93, 233 (2003), 195 190 See, e.g. See, e.g. See, See See, e.g. See, e.g. Congressional Immunity Grants and Separation of Powers: Legislative Vetoes of Aaron-Andrew P. Bruhl, doctrine. see As the Court has explained, it is not always necessary. Under Thus, the mere fact that the Patent Office can intervene in a 191. 190. 195. 192. 194. 193. The scope of this caveat is an unresolved empirical question, and a cir- Citizens United v. FEC, 558 U.S. 310 (2010). necessarily mean that the Patent Office has standing to do so. The question then is whether it is necessary separately to show standing. the one-plaintiff rule, multiple parties that jointly bring a claim for relief must show standing only for one party, and separate showings for the remaining parties are unnecessary. Federal Circuit appeal from a PTAB decision does not, by itself, Term added the clarification that an intervenor cannot rely on the standing of another party in this way if the intervenor seeks relief Georgia v. U.S. Army Corps of Eng’rs, 302 F.3d 1242, 1258 (11th Cir. 2002); Utah Ass’n of Counties v. Clinton, 255 F.3d 1246, 1254 (10th Cir. 2001). rule,” 2018]intervenor sufficient a be can judgment unfavorable an from decisis interest, PATENT OFFICE AS INTERVENOR 233 \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 33 22-MAY-18 11:21 intervenors to enter a case on the side of a shown party that has standing, already with no standing. separate inquiry into the intervenor’s 2006). tential inability to assert future claims. likely that any of these interests would, by itself, be too speculative an injury to establish party standing. As a result, one cannot assume that a party that can satisfy the intervention standard could necessa- rily show standing if that showing were required. (2017), avoids confusion. The term “ by (2009) (discussing the circuit split on whether the requirements for standing and intervention are equivalent). stantive holding of that case, which involved active Congressional officers supervision charged of with executing the Volokh, laws that Congress enacts. Hanah Federal Metchis Prosecutions Synar, 478 U.S. 714, 721 (1986). The one-plaintiff rule has also been Bowsher termed the 2009); Ford v. City of Huntsville, 242 F.3d 235 (5th Cir. 2001). cuit split has grown around the intuitions of different predictable courts doctrine in about the face how of to the empirical craft uncertainty. ert Timmermans, Note, Between Standing and Intervention as of Right 40268-nys_73-2 Sheet No. 42 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 42 40268-nys_73-2 40268-nys_73-2 Sheet No. 42 Side B 05/23/2018 07:56:14 R . EV 196 To 201 . L. R A G , the successful , 38 Nevertheless, 202 Arizonans for Official English Personal Audio 198 203 Shining a Light in a Dim Corner: Stand- , 520 U.S. at 64. This view calls into ques- Arizonans for Official English v. Arizona The question then is whether an inter- an whether is then question The but at present, it remains a doctrine 200 197 Standing of Intervenor-Defendants in Public Law Litiga- Joan Steinman, note 194. 1539, 1550 (2012). see . EV supra Id. L. R . In both cases, the Court held that a separate Article III standing Bruhl, Matthew I. Hall, Where the friendly party with proven standing declines at 1551–52; at 535. at 64–65 (citing Diamond v. Charles, 476 U.S. 54, 68 (1986)). The Id. See Id. Id. See Arizonans for Official English See 199 ORDHAM F Diamond Thus, the Patent Office as intervenor may be able avoid having The answer is likely no. Adverse parties must have standing in- 202. 196. 137 S. Ct. 1645, 1651 (2017). 197. 198. 199. 520 U.S. 43, 64 (1997). 200. 203. 201. , 80 cannot rely on the standing of a friendly party that declines to ap- pear. The Court explained in just review, appellate seeking persons by met be “must standing that as it must be stance.” met by persons appearing in courts of first in- to show its own standing, but only if the agency has entered the case the entered has agency the if only but standing, own its show to on the side of a party that does establish standing, and the so long agency as does not seek Office Patent the that importantly, reveals, This seeks. party friendly relief that is different from what that 813, 831 (2004). 234that is different from what the party with proven standing seeks. NYU The one-plaintiff ANNUAL rule is the subject of a compelling recent SURVEYcritique OFby AMERICAN Aaron-Andrew LAW Bruhl, [Vol. 73:201 \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 34 22-MAY-18 11:21 only from plaintiffs, standing to defend is necessary as well. to appear, the intervenor “cannot step into the shoes of the original the of shoes the into step “cannot intervenor the appear, to party unless the intervenor independently fulfills the requirements of Article III”—even where the intervenor takes the same position party. absent the of that as venor can rely on the standing of an adverse party. dependently of each other. Contrary to popular shorthand that plaintiff’s a duty to show standing means that standing is required with considerable precedential force. the case-or-controversy requirement demands standing “to sue or defend,” not merely standing to sue. ing to Appeal and the Right to Defend a Judgment in the Federal Courts tion the Federal Circuit’s recent panel decision in Personal Audio, L.L.C. v. Elec. Frontier Found., 867 F.3d 1246 (Fed. Cir. 2017). In be sure, a defendant is likely to show standing, as most defendants face the risk of enough injury of a stake from in the case an to satisfy Article adverse III. judgment and so have inquiry was necessary for the intervenor who purported to represent the position of the absent party. friendly party with proven standing was absent both in and in tion 40268-nys_73-2 Sheet No. 42 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 42 40268-nys_73-2 40268-nys_73-2 Sheet No. 43 Side A 05/23/2018 07:56:14 R R R Those 206 And in making the 208 The intervenor stand- 204 209 making the standing require- 207 notes 80–81 and accompanying text. supra 205 Part III.C. note 171 and accompanying text. Part III.C. note 196 and accompanying text. Consumer Watchdog v. Wis. Alumni Research Found., 753 F.3d 1258, See See supra See supra See supra See supra These constraints apply to interventions in favor of patent va- This This is particularly problematic for the Patent Office because it 206. 207. 208. 209. Arizonans for Official English v. Arizona, 520 U.S. 43, 64 (1997). The 204. 205. lidity challengers or patent owners alike. The revealed preference of the Patent Office for siding does mean with that validity as a challengers, practical matter, though, the agency pendent must standing more often show than if it inde- intervened on behalf of the patent owner. Patent owners who suffer invalidation in the will have standing to PTAB appeal the deprivation of their property inter- ests, but challengers who suffer defeat may or may not. often often intervenes specifically to step in for position is in an line with absent the agency’s views. party whose Patent Office itself seems to have taken just this course, however. It argued in sup- patent owner who was invoking judicial review in defense of its patent claims. 867 F.3d at 1250. PTAB challenger (EFF) was “not court to constitutionally defend the excluded PTAB decision from in appearing its favor” in because it was the unsuccessful 2018] PATENT OFFICE AS INTERVENOR 235 \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 35 22-MAY-18 11:21 ment a potentially significant constraint on the agency’s continued use of its intervenor authority as a means for advancing policy aims through Federal Circuit appeals. Meanwhile, when both parties do appear, whichever side the Patent Office favors as intervenor, agency may still have to establish its own standing where the its position promotes a larger structural value or otherwise parties’ looks immediate dispute—as beyond it often does. the case for standing in “shared these generally with the public at large in the situations, proper application an agency of interest the Constitution and that laws will not is do.” quiry only to the extent friendly that party seeks. it seeks relief identical to what its ing cases reveal that the agency cannot rely on the standing either of a friendly party that is absent or of an adverse party that sent. is In pre- such cases, it must establish its parties both where even Moreover, authority. intervenor its exercise own standing in order to to the PTAB adjudication are present on appeal, the Patent Office can rely on the one-plaintiff rule and avoid a separate standing in- who do not will leave the Patent Office obliged to establish its own standing on appeal. Close to a third of Patent Office interventions on appeal fit this pattern (29.2%), 1261–62 (Fed. Cir. 2014); 40268-nys_73-2 Sheet No. 43 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 43 40268-nys_73-2 40268-nys_73-2 Sheet No. 43 Side B 05/23/2018 07:56:14 It 212 ” as being as ” The Patent did point to Massachusetts v. 214 Cf. confirms that the such as where one 211 in the complaint the in Town of Chester Town of Chester itself whether this was intended The court may also reverse the 213 expressed some agreement with this case that it has Article III standing “to advocate Knowles B. The Scope of Intervention doctrine, a reviewing federal court may uphold Town of Chester Chenery Knowles Electronics at 1650–51 (emphasis added). at 1651. at 95. Id. Id. Id. 210 Whether differences between Patent Office arguments and liti- The principles of intervenor standing do not merely require Apart from standing, the substantive positions that the Patent 210. 137 S. Ct. 1645, 1651 (2017). 211. 212. 213. SEC v. Chenery Corp., 318 U.S. 80, 87 214. (1943). agency cannot seek “relief that is different” seeks. from what that party gant arguments during a Federal Circuit appeal amount to differ- ent relief is difficult to predict. One may define relief at a high level of generality, tending to favor sought by two different parties are essentially findings the same. Conversely, that the forms one may define of relief at a high relief level of specificity, tending to favor the opposite outcome. The Court in requested relief of “form the in differences enough to trigger a separate standing inquiry, plemental briefing for the 236 NYU ANNUAL SURVEY OF AMERICAN LAWthe Patent Office independently to show its standing in certain situ- [Vol. 73:201 ations. In the absence of such an independent showing, those prin- ciples also constrain what substantive positions the agency may take upon intervening. Where the agency satisfies Article III by relying on a party with proven standing, \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 36 22-MAY-18 11:21 agency, of course, but to affirm on grounds not articulated by the agency—thoughreview—is court-court court- in in acceptable inapt agency review for reasons of separation of powers. tervenor at 9, Knowles Elecs., L.L.C. v. Matal, No. 16-1954, 2017 WL 3399631, at *9 (Fed. Cir. July 31, 2017). Nevertheless, there are certainly cognizable interests that the United States may assert as sovereign in showing standing. EPA, 549 U.S. 497, 520 (2007) (concluding that Massachusetts the entitle it quasi-sovereign to “special interests solicitude” of in the standing inquiry). Office may properly take as an intervenor lenge appeals in are PTAB also constrained validity by chal- ordinary administrative law. Under the for the correct application of the federal patent laws.” Supplemental Brief for In- is unclear from merely as a sufficient condition and not also a necessary one. party seeks money damages and the other seeks an injunction. Office in an agency’s action only on the grounds that the agency itself cited as its basis for the decision. 40268-nys_73-2 Sheet No. 43 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 43 40268-nys_73-2 40268-nys_73-2 Sheet No. 44 Side A 05/23/2018 07:56:14 R R on This Moreo- 221 216 grounds 217 . or obtaining 218 Chenery The particular interests 220 However, where an issue on 215 -grounds inquiry. The standard for what kinds of inter- 219 24(a)(2). Chenery obligations. . P. IV C. Implications for Private Intervenors note 190 and accompanying text. note 189 and accompanying text. Chenery . R. C 24(b). ED F 318 U.S. at 95 (referring to affirmance upon the same “ Id. See See supra See id. See supra See This stance is somewhat puzzling. Arguing that an agency ac- For example, a would-be intervenor can properly assert the Answering these jurisprudential questions will also do much to 216. 217. 221. 215. Reply in Support of Supplemental Brief for Intervenor at 5, Knowles 219. 220. 218. would, at minimum, seem to be in tension with tion should be upheld because position X is correct seems necessa- rily to be a different ground for affirmance than arguing agency that the action should be upheld because Regardless position of X what is other incorrect. position the appeal, Patent reversing itself on Office the correctness advances of the PTAB’s on reasoning Elecs., L.L.C. v. Matal, No. 16-1954, 2017 WL 2017). 4157187, at *5 (Fed. Cir. Sept. 5, 2018] view about its PATENT OFFICE AS INTERVENOR 237 \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 37 22-MAY-18 11:21 ests are sufficient for intervention of right is lenient relative to the sorts of injuries required for standing. that courts have approved before are well-suited for intervention by private parties. prospect of stare decisis from an unfavorable judgment. enjoys under section 143, private intervenors step face of either the establishing their rights additional to intervene ver, grounds for affirmance—like forms of relief—may be defined broadly or narrowly and thereby also produce different outcomes. The need for clarity on the scope for therefore, invites answers Patent to the Office jurisprudential question of intervention, how to determine the appropriate level of generality in both the separate- relief inquiry and the guide private parties who may wish to intervene, as the Patent fice Of- does, in Federal Circuit appeals from validity challenges in the PTAB. Without statutory authority such as what the Patent Office appeal appeal is one on which the PTAB ruled below, the agency reserved to itself the right to take a different position on the issue. would be of interest not only who are to engaged with patent policy, but also firms to potential infringers or advocacy organizations leave to do so permissively. which the agency acted,” not on different grounds (emphasis pertaining added)). to the same issue 40268-nys_73-2 Sheet No. 44 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 44 40268-nys_73-2 40268-nys_73-2 Sheet No. 44 Side B 05/23/2018 07:56:14 R R R R R J. , 29 This would likely be of 222 note 4, at 73–74. note 4, at 49–50, 59, 65–66, 74–75. note 19. Litigation and Settlement in the Federal supra supra supra 223 notes 80–81 and accompanying text. 142 private parties intervened in only 43 The AIA proceedings’ liberal rules on join- supra 227 Richard L. Revesz, 224 Part III.C. note 191 and accompanying text. In other words, this selection effect offers savings of but these effects are limited to the agency adjudica- 226 225 See generally Consumer Watchdog v. Wis. Alumni Research Found., 753 F.3d 1258, Vishnubhakat, Rai & Kesan, Vishnubhakat, Rai & Kesan, 685 (2000); Priest & Klein, . See See See supra See supra See TUD S Moreover, under the one-plaintiff rule, intervening on appeal Current intervention in Federal Circuit appeals is largely, 224. 225. 226. It is well documented in the law and economics literature that the cases 227. 222. 223. EGAL L Appellate Courts: Impact of Panel Selection Procedures on Ideologically Divided Courts would solve the significant problem of standing for private parties who could not otherwise make the leap from agency adjudication to Article III review. that survive settlement and post-trial process such as motions for withstanding judgments the not- verdict that proceed to appeal are likely to existing be uncertain law. under 238 who sensibly wish to avoid NYU relitigating the patent ANNUALor the validity probative force of of a certain piece SURVEYof a prior knowledge particular OFin a given technology, or against AMERICANa given patented invention or class LAWof inventions. Similarly, a would-be [Vol. intervenor 73:201 can properly assert the prospect of future adverse litigation. \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 38 22-MAY-18 11:21 the appeal. the cost that a party would otherwise have to bear in searching out patents and patent cases in which to commit its resources, albeit at the expense of entering late in the case after many issues ready have been al- framed or even resolved. though not exclusively, a Patent Office activity. Analysis of data on intervenors in the Federal Circuit reveals that, during the period of in intervened Office Patent the when 2017, April to 2013 December 145 docketed cases, tion process. So long as an intervenor who seeks the same relief as a party with proven standing need however, validity not challengers without standing seem establish to have a its back own standing, door into the appellate review process. Even parties who were not involved in the PTAB adjudication may reasonably infer the impor- tance of a case from the fact that it was appealed at all, and opt into der and their lack of standing requirements have mitigated a con- siderable collective action challenges, problem in bringing patent validity great interest to potential infringers of the patent the in majority of question, parties (70%) as who bring a PTAB validity challenge are prior defendants in an court on the infringement same patent. lawsuit in U.S. district 1261–62 (Fed. Cir. 2014); 40268-nys_73-2 Sheet No. 44 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 44 40268-nys_73-2 40268-nys_73-2 Sheet No. 45 Side A 05/23/2018 07:56:14 V. CONCLUSION By contrast, during the equivalent preceding period of http://www.docketnavigator.com [https://perma.cc/NVF6-U4XH]. 228 The recently created authority of the Patent Office to inter- What remains unknown, moreover, is whether the private par- A decline in the relative share of private-party intervention cou- intervention private-party of share relative the in decline A 228. Data on Federal Circuit intervenors was gathered using Docket Naviga- See vene in appeals from its own administrative adjudications of patent validity has conferred both agency. discretion The observed and current usage obligation of this upon statutory intervention the tor. 2018]cases. PATENT OFFICE AS INTERVENOR 239 \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 39 22-MAY-18 11:21 tervention, that outcome seems preferable to a complete abdication complete a to preferable seems outcome that tervention, by private parties of the effort to intervene. ties that intervened, either before or after the Patent Office’s ascen- dant role, participated in the dispute below as inter- private-party these whether unknown also is It appeal. on only well or intervened venors could have shown, or standing. Further did analysis of show, these issues independent would shed Article hypotheses light on III above the regarding selective intervention on the appeal use and of the one-plaintiff rule to sidestep a standing tween agency inquiry adjudication be- and Article III review. pled with more concentrated case selection by private parties sug- gests a net offloading onto the Patent Office of the responsibility to intervene. This is significant precisely because private party venors inter- will often have a greater ability show an interest than that is sufficient the to intervene in Patent a given Office case. Still, to rather than entrust the protection of larger social interests to a dif- fuse group of private-party intervenors, Congress the coordinating has and policymaking recognized function that agency interven- tion can properly serve—within constitutional limits. When under- stood this way, further intervention useful by adjunct, especially private for those parties who remains may be a dissatisfied by agency’s priorities. Thus, if the decline in the private-party intervention has reached, or will soon reach, some equilibrium with agency in- February February 2010 to November 2013, 63 private parties intervened in 30 docketed cases while the Patent Office apparently did not inter- vene in any. The distribution of private-party intervenors after De- cember 2013, when the Patent Office began exercising its authority under section 143, appears to have shifted trated, multi-party toward intervention more as compared concen- to the pre-December 2013 period. Table 2 and Figure 1 summarize these findings. 40268-nys_73-2 Sheet No. 45 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 45 40268-nys_73-2 40268-nys_73-2 Sheet No. 45 Side B 05/23/2018 07:56:14 Knowles Electronics cently taken before the Federal Circuit. The Federal Circuit, for its part, has an opportunity in the currently pending case to clarify how these general principles of justiciability and pro- cedure will reshape participation and engagement with the patent system in the era of PTAB review, not only by the Patent Office but also by the public. 240 authority is best understood as part NYU of a cymaking ANNUAL larger that campaign of the SURVEY poli- agency has OF undertaken Federal after Circuit AMERICAN primacy in U.S. a patent law. Choices by long agency LAWlead- period of ership about when to intervene and [Vol. what 73:201 positions to take are, prevailing by understandings of Article III standing generally and in- tervenor standing in particular, relatively under unfettered, particularly the one-plaintiff about rule. the limits Recent of intervenor standing, Supreme however, should agency Court give pause in the pressing guidance the highly expansive view that it has re- \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 40 22-MAY-18 11:21 40268-nys_73-2 Sheet No. 45 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 45 40268-nys_73-2 40268-nys_73-2 Sheet No. 46 Side A 05/23/2018 07:56:14

19 96 Subtotal 77 229

142 parties 43 cases Dec. 2013–Sept. 2017

28 Challenger Did Not Participate in Appeal

Intervenor Authority (Dec. 2013–Apr. 2017) 63 parties 30 cases Feb. 2010–Nov. 2013 49 19 28 0 68 Participate in Appeal Challenger Did APPENDIX: APPENDIX: TABLES AND FIGURES 0 cases 145 cases cases cases 145 0

and after the Patent Office Began Using its § 143 Circuit Appeals Where the Patent Office Intervened

229. Case data on USPTO intervention in the Federal Circuit was gathered Table 2. Intervention in Docketed Federal Circuit Cases before Table 1. Procedural Posture of Consolidated Disputes in Federal Private Party Patent Office Subtotal Challenger Won in the PTAB Challenger Lost in the PTAB Intervenor

using Docket Navigator. See http://www.docketnavigator.com [https://perma.cc/ NVF6-U4XH]. Data about the agency’s positions was hand-coded from its briefs in those cases. 2018] PATENT OFFICE AS INTERVENOR 241 \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 41 22-MAY-18 11:21 40268-nys_73-2 Sheet No. 46 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 46 40268-nys_73-2 40268-nys_73-2 Sheet No. 46 Side B 05/23/2018 07:56:14 and Multi-Intervenor Appeals in the Federal Circuit Figure Figure 1. Distribution of Private-Party Intervenors across Single- 242 NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:201 \\jciprod01\productn\N\NYS\73-2\NYS202.txt unknown Seq: 42 22-MAY-18 11:21 40268-nys_73-2 Sheet No. 46 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 46 40268-nys_73-2 40268-nys_73-2 Sheet No. 47 Side A 05/23/2018 07:56:14 , , In RADE 2 . & T 2 (2015), FF A CTION A OREIGN F EU Restrictive Measures Restrictive EU LAN OF T OF ’ P https://www.treasury.gov/re- , EP D T ’ , http://www.consilium.europa.eu/ OV REASURY G NION T U OMPREHENSIVE 243 In the mid-2000s, Iran’s efforts to- 1 C In response to these steps, many West- 3 T OF THE USTRALIAN OINT ’ UROPEAN A The United States lifted its sanctions on INTRODUCTION EP , , J S. RIANE HARPER* E 4 UK and Iran Appoint Ambassadors for First Time Since 2011 TATE U.S. D S , IRAN’S IRAN’S WORLD TRADE T OF ’ Iran Sanctions (Sept. 5, 2016), https://www.theguardian.com/world/2016/sep/ , EP OUNCIL OF THE ORGANIZATION ORGANIZATION ACCESSION? C , Iran Sanctions See, e.g. U.S. D UARDIAN For decades, the United States has imposed trade restrictions * S. Riane Harper formerly served as a foreign affairs officer for the U.S. 1. 2. 3. 4. Patrick Wintour, G CAN CAN U.S. SANCTIONS ON IRAN SURVIVE HE on Iran due to concerns rights violations, and support for terrorism. These trade restrictions about Iran’s nuclear program, human include a full embargo on all goods and services to and from Iran and the United States and sanctions who barring engage in third-country specified transactions actors with Iran from a range of ac- tivities with the United States. Department of State. The opinions and characterizations in this piece are those of the author, and government. do not necessarily represent official positions of the U.S. T \\jciprod01\productn\N\NYS\73-2\NYS203.txt unknown Seq: 1 22-MAY-18 12:31 Iran’s nuclear-related activities after Iran took the necessary steps, but it kept in place other trade restrictions based on Iran’s human ward a nuclear weapon spurred other around the world nations to impose their own and trade restrictions on Iran organizations in the hopes of shifting Iran’s calculus to reject weaponization. source-center/sanctions/Programs/Pages/iran.aspx source-center/sanctions/Programs/Pages/iran.aspx [https://perma.cc/48KE- SR8H]. en/policies/sanctions/iran [https://perma.cc/RHL5-MQCA]. ern countries rolled back trade restrictions and revived their diplo- matic missions to Iran. https://www.state.gov/documents/organization/245317.pdf https://www.state.gov/documents/organization/245317.pdf [https://perma.cc/ ZXK2-RPB9]. iran/pages/iran.aspx [https://perma.cc/6F9E-Z6SV]; Against Iran 05/britain-iran-appoint-first-ambassadors-since-2011-nazanin-zaghari-ratcliffe [https://perma.cc/48ZY-HN4C]. http://dfat.gov.au/international-relations/security/sanctions/sanctions-regimes/ 2015, after extensive multilateral negotiations, Iran committed take to concrete steps to guarantee that its nuclear only program for peaceful purposes. is used 40268-nys_73-2 Sheet No. 47 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 47 40268-nys_73-2 40268-nys_73-2 Sheet No. 47 Side B 05/23/2018 07:56:14 (May (2016), . RG Members EUTERS 11 R O 6 (2016), https:/ , . 12 RG RADE O T RADE ORLD T W , WTO members, including ORLD Iran Seeks EU Leverage to Get Finan- 9 W , Yet international pressure rose to 5 The WTO enforces and enables (2016), https://www.wto.org/english/thewto 7 . (Apr. 16, 2016), http://www.reuters.com/arti- RG O note 1. EUTERS RADE R , T supra , ORLD W When a WTO member feels another member is vio- , 10 The GATT seeks to promote higher living standards and 8 Membership, Alliances, and Bureaucracy Id. Understanding the WTO: Settling Disputes Marking Difference with U.S., France Urges Dialogue with Iran Iran Sanctions Overview If Iran acceded to the WTO, it would be able to use the WTO Not long after the nuclear agreement, Iran reasserted its inter- 6. 5. 9. General Agreement on Tariffs and Trade, Oct. 30, 1947, 61 Stat. A-11, 55 10. 12. 11. 7. Bozorgmehr Sharafedin & Julia Fioretti, 8. most centrally the General Agreement on Tariffs and Trade _e/whatis_e/wto_dg_stat_e.htm [https://perma.cc/2GBX-G7LU]. U.N.T.S. 194 [hereinafter GATT]. dispute settlement mechanism to challenge the trade that the United restrictions States continues to impose on Iran as violations of its obligations to a fellow WTO would require the United States to either modify its policies regard- member. A successful challenge est in joining the World Trade pean Organization (WTO), with Union Euro- (EU) support. 244 rights violations and support for NYU terrorism, including bargo ANNUAL on its U.S. full trade SURVEY with em- Iran. OF AMERICAN LAW [Vol. 73:243 \\jciprod01\productn\N\NYS\73-2\NYS203.txt unknown Seq: 2 22-MAY-18 12:31 welcome welcome Iran back into the international community. lating the terms of WTO covered agreements, they must bring their case to the WTO dispute settlement mechanism to compel changes by the offending state and authorize punitive measures. the United States and EU, commit to set their trade policies in line multilateral related and GATT the of provisions substantive the with agreements. international international agreements regarding trade amongst its members— (GATT). https://www.wto.org/english/thewto_e/whatis_e/tif_e/disp1_e.htm [https://per ma.cc/5AHB-KFM9]. global growth through the other “substantial barriers reduction to of trade and tariffs treatment to in and international commerce.” the elimination of discriminatory /www.wto.org/english/thewto_e/whatis_e/tif_e/org3_e.htm /www.wto.org/english/thewto_e/whatis_e/tif_e/org3_e.htm [https://perma.cc/ ECC2-CDNV]. 22, 2017), urges-dialogue-with-iran-2017-5?r=UK&IR=T http://www.businessinsider.com/r-marking-difference-with-us-france- [https://perma.cc/V8FY-GLJ9]. cial Concessions from U.S. cle/us-iran-nuclear-usa-idUSKCN0XD0E3 cle/us-iran-nuclear-usa-idUSKCN0XD0E3 [https://perma.cc/8E75-NQUX]. commit to comply with the rulings of the dispute settlement mecha- settlement dispute the of rulings the with comply to commit nism; the binding dispute settlement mechanism is the “central pil- lar of the multilateral contribution to the stability trading of the global economy.” system, and the WTO’s unique 40268-nys_73-2 Sheet No. 47 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 47 40268-nys_73-2 40268-nys_73-2 Sheet No. 48 Side A 05/23/2018 07:56:14 Dur- 13 (2015), http:/ HEET S ACT F RAN I The Reagan administration re- 14 I. ELATIONS WITH , U.S. R TATE S T OF ’ EP U.S. Sanctions on Iran from 1980 through 2014 THE HISTORY OF U.S. SANCTIONS ON IRAN U.S. D The United States and Iran have not had direct diplomatic re- Part I of this Note establishes the background of U.S. trade 13. 14. Blocking Iranian Government Property, Exec. Order No. 12170, 44 Fed. lations since 1980. In 1979, Iranian revolutionaries held more than fifty American diplomats and citizens hostage for 444 days. whether the three distinct trade restrictions that the United States currently imposes on Iran—(1) the U.S. services embargo from on Iran, (2) goods the and secondary sanctions that party punish trade with third- Iran, and (3) the general license financing restric- tions on permitted trade under those principles the based on current nuclear WTO case agreement—violatelaw. Part III analyzes whether exceptions apply that would allow the United States to pre- serve these restrictions even if they violate GATT Note principles. concludes This that WTO rulings to date indicate could U.S. survive sanctions a direct Iranian challenge under resolution mechanism if Iran became a WTO member, but also rec- the WTO dispute ognizes that there are other ways Iran could use the WTO dispute settlement mechanism to change U.S. trade policy. 2018]ing Iranian trade or defy the foundational principles of the interna- tional trade system that ensures free markets for U.S. goods abroad. CAN U.S. SANCTIONS ON IRAN SURVIVE?This Note assesses whether Iran could successfully convince WTO dispute resolution bodies that the major pillars of U.S. trade restric- tions on Iran are prohibited by the GATT. 245 restrictions on Iran and Iran’s interest in WTO membership. Part II identifies core principles under the GATT that would govern U.S. policy toward Iran if Iran acceded to the WTO and analyzes \\jciprod01\productn\N\NYS\73-2\NYS203.txt unknown Seq: 3 22-MAY-18 12:31 /www.state.gov/r/pa/ei/bgn/5314.htm /www.state.gov/r/pa/ei/bgn/5314.htm [https://perma.cc/Y39E-LB8L]. Reg. 65729 (Nov. 14, 1979); Prohibiting Certain Transactions with Iran, Exec. Or- Order Exec. Exec. by (amended 1980) 7, (Apr. 24,099 Reg. Fed. 45 12,205, No. der No. 12211, 45 Fed. Reg. 26,685 (Apr. 17, 1980) (rescinded by the Algiers Accords of 1981)). terrorism, first barring weapons sales and foreign aid to Iran in instated trade restrictions in response to Iran’s state sponsorship of ing the hostage crisis, the United States imposed the first of many sanctions regimes on Iran, freezing all when the Iranian hostages were assets released. until 1981, 40268-nys_73-2 Sheet No. 48 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 48 40268-nys_73-2 40268-nys_73-2 Sheet No. 48 Side B 05/23/2018 07:56:14 UIDE (2010), : A G EACE These so- RAN P 19 I OF . NST GAINST A U.S. I , , http://www.state.gov/j/ct/ , TATE ANCTIONS S ., S T OF CH ’ S EP . ] 4 (Gary Samore ed., 2015), http://belfercen RAN U.S. D U.S. ENNEDY , I K Iran and the Palestinians Congress went a step further and passed the IMETABLES GAINST 18 T ARVARD A 16 AND ., H , TR C ERMS ANCTIONS S When Iran then revived its efforts to enrich uranium, , T With no enforcement, foreign companies eventually be- ELFER 17 20 B State Sponsors of Terrorism of Sponsors State and then in 1987 prohibiting nearly all imports from Iran to 15 Iran continued to sponsor terrorism in the region into the However, the Clinton and then Bush administrations preferred administrations Bush then and Clinton the However, ARGETS 15. 18.12959, Order Exec. Iran, to Respect with Transactions Certain Prohibiting 19. Iran Sanctions Act of 1996, 50 U.S.C. § 1701 (2016) (originally enacted as 20. 16. Prohibiting Imports from Iran, Exec. Order No. 12,613, 52 17. Fed. Reg. Rachel Brandenburg, T 1990s, including Hamas militants opposed to the Middle East peace process. gan to consider the ISA sanctions defunct, and they began to rein- the United States. President President Clinton declared a national emergency Iran with and imposed a respect full trade and to investment embargo, barring all U.S. trade with Iran. TO 2461984 NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:243 \\jciprod01\productn\N\NYS\73-2\NYS203.txt unknown Seq: 4 22-MAY-18 12:31 ter.ksg.harvard.edu/files/Iran%20Sanctions.pdf [https://perma.cc/VX2E-U2WF] [hereinafter 60 Fed. Reg. 24,757 (May 6, 1995); Prohibiting Certain Transactions with Respect to the Development of Iranian Petroleum Resources, Exec. Order No. 12957, Fed. 60 Reg. 14,615 (Mar. 17, 1995). the Iran and Libya Sanctions Act of 1996). market. http://iranprimer.usip.org/resource/iran-and-palestinians [https://perma.cc/ EPE3-AUMV] (last updated Jan. 2016 by Cameron Glenn & Garrett 1990] Nada) Iran (“[In pledged military and financial support—reportedly $30 million annu- ally—as well as advanced military training for thousands of Hamas activists at Revo- lutionary Guard bases in Iran and Lebanon.”). called “secondary sanctions” sought to non-U.S. deny trade and funds investment to and thereby Iran constrict from its fund both ability its terrorist to and nuclear ambitions. to use diplomatic pressure to convince foreign companies to leave the Iranian market rather than impose sanctions using the ISA au- thorities. In part, this was because the EU strenuously objected that the secondary sanctions inappropriately extended U.S. law extrater- ritorially, punishing third-country nationals for trade legal their own government’s laws and without a under direct nexus to the U.S. list/c14151.htm [https://perma.cc/52UG-E67U]. 41940 (Oct. 30, 1987). tions Act, or ISA), which, in its first iteration, penalties imposed on foreign U.S. companies determined trade to have invested more than $20 million in Iranian petroleum development. Iran and Libya Sanctions Act of 1996 (now known as the Iran Sanc- 40268-nys_73-2 Sheet No. 48 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 48 40268-nys_73-2 40268-nys_73-2 Sheet No. 49 Side A 05/23/2018 07:56:14 21 note 20, at 6. note 20, at 8. supra supra Plan of Action (JCPOA) The U.S. State and Treasury Departments began to The global community responded from 2006 to 2010 , Press Release, U.S. Dep’t of State, Persons on Whom Sanctions 25 22 With an international consensus that more pressure was pressure more that consensus international an With 27 at 6–7. Critically, UNSCR 1929 in 2010 recognized a “potential The Obama Administration and the Joint Comprehensive Id. See, e.g. 23 Claiming international legitimacy from the UNSCR lan- The EU’s extraterritoriality concerns largely dissipated as the 24 By 2006, Iran’s progress toward a nuclear weapon reached a The Obama administration pursued a dual-track approach to 21. Kenneth Katzman, Cong. Research Serv., RS20871, The Iran Sanctions 22. Sanctions Against Iran, 23. 24. S.C. Res. 1929, ¶ 17 (June 9, 25.2010). Comprehensive Iran Sanctions, Accountability, and Divestment Act of 26. 27. Sanctions Against Iran, 26 crisis point. guage, the United regime and expanded it with new legislation aimed at cutting off States all revived the foreign ISA support to Iran’s secondary energy sector sanctions (the Sanctions, Accountability, Comprehensive and Divestment Iran Act of 2010, also known as CISADA). about restricting trade fell largely to the wayside. counter Iran’s nuclear ambitions: negotiations alongside the other members of the UN Security Council and Germany (the P5+1) and ever-increasing secondary sanctions through both executive orders Act (ISA) 3 (2007), https://www.fas.org/sgp/crs/row/RS20871.pdf [https://per ma.cc/T626-58DZ]. enforce the long-stagnant CISADA restrictions by ISA blocking foreign companies from sanctions the U.S. financial market along that maintained investments in Iran’s with energy sec- the tor. new needed to stop Iran’s march toward nuclear armament, concerns 2018]vest in Iran’s oil sector despite ISA and concerns that the proceeds supported CAN Iran’s U.S. nuclear SANCTIONS capabilities. ON IRAN SURVIVE? 247 \\jciprod01\productn\N\NYS\73-2\NYS203.txt unknown Seq: 5 22-MAY-18 12:31 with new United Nations (UN) sanctions on support to Iran’s nu- clear program in a series of UN Security Council Resolutions (UN- SCRs). EU imposed its own penalties on EU companies investing in Iran’s sector. oil ties.” connection between Iran’s revenues derived from its energy sector and the funding of Iran’s proliferation-sensitive nuclear activi- 2010, Pub. L. No. 111-195, 124 Stat. 1312 (codified as amended tions in of scattered 50 sec- U.S.C.). Have Been Imposed Under the Iran Sanctions Act of 1996 (Sept. 6, 2011), http:// www.state.gov/e/eb/rls/othr/2011/172350.htm [https://web.archive.org/web/ 20120113044651/http://www.state.gov/e/eb/rls/othr/2011/172350.htm]. 40268-nys_73-2 Sheet No. 49 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 49 40268-nys_73-2 40268-nys_73-2 Sheet No. 49 Side B 05/23/2018 07:56:14 (July 23, ERTAINING TO P (Sept. 30, 2013), 30, (Sept. NTITIES RAN E I IMES Iranian oil sales, 31 N.Y. T , ANCTIONS ON NDIVIDUALS AND U.S. S That meant third-country compa- (Nov. 24, 2013), http://www.washington . -U.S. I 29 By 2013, U.S. secondary sanctions and many were. The international community coop- ON NST 28 30 32 . I N VERVIEW OF ASH , O W , Iran Staggers as Sanctions Hit TATE S 33 T OF RANSACTIONS BY ’ , Media Note, U.S. Dep’t of State, Companies Sanctioned Under T EP Just over a year later, the parties announced the Joint Com- U.S. D Reversing Iran’s Nuclear Program: Hearing Before the S. Foreign Relations Joint Plan of Action Id. See, e.g 34 , 113th Cong. (2013) (statement of Wendy Sherman, Under Sec’y for Pol. Then, the parallel track of negotiations reached a break- 28. 29. 33. National Defense Authorization Act for 2012, Pub. L. No. 112-81, § 1245 34. 30. 31. 32. David Cohen, Under Sec’y for Terrorism and Financial Intelligence, U.S. CTIVITIES AND institute.org/uploads/Documents/other/IranP5plus1jointplanofaction131124en .pdf [https://perma.cc/D2MS-K8N3]. through. In November 2013, the P5+1 and Iran announced a Joint Plan of Action to freeze Iranian nuclear progress and relieve some sanctions pressure while the parties worked toward ment. a final agree- Comm. Affs., U.S. Dep’t of State). A 248and legislation like CISADA. NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:243 \\jciprod01\productn\N\NYS\73-2\NYS203.txt unknown Seq: 6 22-MAY-18 12:31 prehensive Plan of Action (JCPOA): a ten-year timeline of steps to erated with American legislative requirements to keep the proceeds from the limited continuing purchasing country and only accessible to Iran for purchasing from oil sales in local bank suppliers. accounts in the nies that, among other things, bought Iranian petrochemicals, sold auto kits to Iran, or held Iranian rials risked being cut off from the U.S. banking system entirely; India, and the EU replaced Iranian from Iraq light and Saudi crude Arabia. with alternatives which accounted for 80 Turkey, China, like importers major as half in cut were 2012, before percent of the government’s revenue “The Law and Policy of Iran .gov/press-center/press-releases/Pages/tg1706.aspx Sanctions” (Sept. 12, 2012), [https://perma.cc/7LS6- https://www.treasury FR3Y]; Thomas Erdbrink, http://www.nytimes.com/2013/10/01/world/middleeast/iran-staggers-as-sanc- tions-hit-economy.html?_r=0 [https://perma.cc/X3Z3-P5SP]. (2012). 2013), http://www.state.gov/documents/organization/212555.pdf [https://per ma.ccAP6J-TXTZ] [hereinafter Overview of U.S. Sanctions on Iran]. the Iran Sanctions Act and the Iran Threat Reduction and Syria Human Rights Act (Mar. 14, 2013), https://2009-2017.state.gov/r/pa/prs/ps/2013/03/206268.htm [https://perma.cc/7LS6-FR3Y]. Dep’t of the Treasury, Remarks before the New York University School of Law on extended extended to nearly all foreign trade with shipping, petrochemical, insurance, and automotive Iran’s sectors, as well energy, banking, as transfers of Iranian currency. 40268-nys_73-2 Sheet No. 49 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 49 40268-nys_73-2 40268-nys_73-2 Sheet No. 50 Side A 05/23/2018 07:56:14 35 41 The UN, EU, 36 , Guidance Relating to TATE S T OF Instead, the president exe- ’ 42 EP On Implementation Day, the 40 39 note 20, at 20. & U.S. D The EU lifted its embargo on Iranian supra 38 REASURY T T OF THE ’ EP . The UN implemented its sanctions rollback by terminating U.S. D 37 But the Obama administration lacked the legal authority On Implementation Day, January 16, 2016, the International 40. Kenneth Katzman, Cong. Research Serv., RS20871, Iran 41. Sanctions 19 42. Sanctions Against Iran, 36. Press Release, Yukiya Amano, Director, IAEA Director General’s State- 37. Statement by John Kerry, U.S. Sec’y of State (Jan. 16, 2016), https://2009- 38. S.C. Res. 2231, ¶ 5–9 (July 20, 2015) (establishing a trigger for sanctions 39. Council Implementing Regulation 2015/1862, 2015 O.J. (L 274) 161 (es- 35. Media Note, U.S. Dep’t of State, Parameters for a Joint Comprehensive under U.S. law to fully rescind many of the secondary sanctions committed to it lift under the JCPOA. Atomic Energy Agency (IAEA) confirmed that Iran met its obliga- tions under the JCPOA to trigger sanctions relief. tablishing a trigger for sanctions rescission Implementation Day). (2017). Plan of Action Regarding the Islamic Republic of Iran’s Nuclear Program (Apr. 2, 2015), http://www.state.gov/r/pa/prs/ps/2015/04/240170.htm .archive.org/web/20150403095736/http://www.state.gov/r/pa/prs/ps/2015/04/ [https://web 240170.htm]. ment on Iran, Int’l Atomic Energy Agency (Jan. 16, 2016), https://www.iaea.org/ newscenter/statements/iaea-director-general%E2%80%99s-statement-iran [https://perma.cc/HZ4M-SHMJ]. . 2017.state.gov/secretary/remarks/2016/01/251336.htm [https://perma.cc/ 7TKZ-4574]. rescission Implementation Day). However, many sanctions authorized by legislation could not be re- scinded without congressional action. 2018] assure the international community that Iran would not reach nu- clear CAN capacity that U.S. includes SANCTIONS a roll ON back IRAN of SURVIVE? international sanctions. 249 \\jciprod01\productn\N\NYS\73-2\NYS203.txt unknown Seq: 7 22-MAY-18 12:31 the provisions of Security Council resolutions that imposed nuclear- imposed that resolutions Council Security of provisions the related sanctions on Iran. United States rescinded secondary sanctions authorized by execu- tive order and removed designated individuals from blacklists. and United States concurrently announced a backs. wide range of roll- oil and amended its regulations to rescind sanctions relating to or- dinary non-nuclear trade with Iran. cuted a series of legal waivers of the imposition of sanctions on any foreign companies engaged in activities potentially violating the the Lifting of Certain U.S. Sanctions Pursuant to the Joint Comprehensive Plan of Action on Implementation Day ter/sanctions/Programs/Documents/implement_guide_jcpoa.pdf (2016), https://www.treasury.gov/resource-cen [https://per ma.cc/64EM-YEJP] [hereinafter Guidance Relating to the Lifting of Certain U.S. Sanctions] 40268-nys_73-2 Sheet No. 50 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 50 40268-nys_73-2 40268-nys_73-2 Sheet No. 50 Side B 05/23/2018 07:56:14 LAN OF note 41. note 41, P ELATING TO The most The presi- R supra supra 43 44 Moreover, the 47 UESTIONS OMPREHENSIVE C Q OINT SKED J A (2016) (“U.S. persons continue to be note 48. NDER THE AY REQUENTLY U (May 17, 2017, 4:57 PM), http://www.npr D note 20, at 16 (“[A] small number of sanc- , F Trump Administration Upholds Iran Sanctions supra NPR As part of the JCPOA deal, the United , supra 48 46 All other trade with Iran is still prohibited ANCTIONS REASURY 49 T U.S. S MPLEMENTATION I And as Iran continues to engage in concerning be- ON T OF THE ’ ERTAIN 50 , Merrit Kennedy, EP C at 15. The United States has spun this legal formulation as an in- Id. U.S. D See, e.g. (JCPOA) 45 IFTING OF Not all sanctions on Iran were lifted under the JCPOA agree- 44. 43. Guidance Relating to the Lifting of Certain U.S. Sanctions, 45. 46. Barack Obama, President, U.S., Remarks on the Iran Nuclear Deal (Aug. 47. Sanctions Against Iran, 49. Guidance Relating to the Lifting of Certain U.S. Sanctions, 50. U.S. Dep’t of the Treasury, 48. L CTION ment. UN, US, and EU sanctions based on Iran’s human rights re- cord and support authorities, in the for United States, and terrorism in Europe. remain in force under UN Waiver, Keeping Nuclear Deal Alive the terms of the JCPOA. tegral part of its public policy: keeping the laws technically on the books allows for a quick “snapback” of sanctions should Iran violate THE A 250 statutory provisions during the timeframe of the waiver. NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:243 \\jciprod01\productn\N\NYS\73-2\NYS203.txt unknown Seq: 8 22-MAY-18 12:31 .org/sections/thetwo-way/2017/05/17/528806647/trump-administration-up- holds-iran-sanctions-waiver-keeping-nuclear-deal-alive [https://perma.cc/X3QC- G84D]. 5, 2015), https://www.whitehouse.gov/the-press-office/2015/08/05/remarks-pres- ident-iran-nuclear-deal [https://perma.cc/8XNT-SPRW]. States issued a series of general licenses allowing for the import of States United the to carpets and pistachios like goods luxury certain from Iran and certain aviation United States and Iran. goods and services between the generally prohibited from engaging in transactions or dealings involving Iran, in- cluding the Government of Iran and Iranian financial institutions, with the excep- tion of specific activities OFAC.”). that are exempt from regulation or authorized at 29. by to Americans. tions also target Iran’s support for terrorism and violation of April human rights. 2 The joint statement confirmed that only ‘nuclear-related’ sanctions relieved, leaving would other be sanctions in place.”). potent potent forms of secondary sanctions, like penalties for from Iran buying and oil entering into contracts with Iran’s energy industry, remain technically on the books in the United States. United States did not commit to lift its unilateral embargo on Ira- nian goods in the JCPOA. dent will need to waive the application every six to twelve for months the duration of the JCPOA until Congress acts to lift the tions. sanc- 40268-nys_73-2 Sheet No. 50 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 50 40268-nys_73-2 40268-nys_73-2 Sheet No. 51 Side A 05/23/2018 07:56:14 , . , 55 US B Iran L ’ 56 NT I , As international 57 54 51 The chance to reinvest in reinvest to chance The 52 While Congress Argues over Iran, Europe Iran is trying to encourage 53 (Aug. 21, 2015), https://www.washington OST . P ASH After Iran Elections, Rouhani Aims for Economic Reform W Historic Iran Nuclear Deal: World Leaders React , Iran, Biggest Economy Outside WTO, Says It’s Ready to Join Normalization Normalization and WTO Accession , Press Release, U.S. Dep’t of the Treasury, Treasury Sanctions See, e.g. Id. Id. (Dec. 17, 2015), http://www.reuters.com/article/us-iran-wto-idUSKBN0 (Mar. 1, 2016), https://www.yahoo.com/news/iran-elections-rouhani-aims- (Apr. 2, 2015), http://www.ibtimes.com/historic-iran-nuclear-deal-world- As part of its efforts to restore ties with the international econ- While concerns with Iran’s activities remain, the JCPOA has 55. Tom Miles, 51. 53. Michael Birnbaum & Carol Morello, 56. 57. 54. Arthur MacMillan, 52. Barbara Herman, EUTERS IMES AHOO T been widely hailed as an opportunity to normalize Iran’s relations with the developed world more broadly. omy, Iran is restarting its push for membership in the WTO. economic-reform-153747816.html?ref=gs economic-reform-153747816.html?ref=gs [https://perma.cc/S3WF-9PLJ]. Y R leaders-react-1868464 [https://perma.cc/X8XT-D66L]. . Rushes to Do Business There Iran’s industry minister Mohammad Reza Nematzadeh said in De- cember 2015: “Finalizing WTO membership is therefore a priority for the Iranian government. As the largest non-member economy in the world, our full membership will be win-win for all and a sig- nificant step towards creating a truly universal organization.” 2018] havior, like ballistic missile tests, the United States serve and CAN the U.S. others right SANCTIONS to ON re- impose IRAN SURVIVE? further penalties. 251 \\jciprod01\productn\N\NYS\73-2\NYS203.txt unknown Seq: 9 22-MAY-18 12:31 U02NZ20151217 [https://perma.cc/EU4W-F69L]. [https://perma.cc/6V2F-QUJH]. post.com/world/europe/while-congress-argues-over-iran-europe-rushes-to-do-busi- ness-there/2015/08/21/4a715ab6-45b6-11e5-9f53-d1e3ddfd0cda_story.html trust in Iran accrues under the JCPOA, American and global for- terest of European companies no longer subject to EU restrictions or U.S. secondary sanctions policies trade its liberalizing by economy its in reengagement global risks. and pursuing regional economic cooperation. Iran’s economy after nearly a decade of barriers has piqued the in- first applied for WTO membership in July 1996, but the WTO be- gan to consider its membership only in 2005. Those Involved in Ballistic Missile Procurement (Jan. 17, 2016), https://www.trea- sury.gov/press-center/press-releases/Pages/jl0322.aspx [https://perma.cc/8767- KSTG] (announcing the imposition of sanctions on Iranians involved in missile ballistic procurement). 40268-nys_73-2 Sheet No. 51 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 51 40268-nys_73-2 40268-nys_73-2 Sheet No. 51 Side B 05/23/2018 07:56:14 58 In this 60 Assuming these 61 note 11. All WTO members sit on sit members WTO All 62 supra Iran Seeks EU Leverage to Get Finan- However, a situation could , 59 II. , https://www.wto.org/english/thewto_e/ . RG (Apr. 16, 2016), http://www.reuters.com/arti- O RADE EUTERS R T , RESTRICTIONS ON IRAN IMPLICATED BY U.S. TRADE note 9, arts. I, II, XI. ORLD Bringing a Complaint before the WTO W supra , CORE PRINCIPLES OF WTO MEMBERSHIP Understanding the WTO: Settling Disputes Id. The increased potential for Iran’s WTO accession raises chal- Iran, as a member of the WTO, would first be required to en- 58. Bozorgmehr Sharafedin & Julia Fioretti, 60. GATT, 61. 62. 59. WTO Accession on average takes nine and a half years and requires enact- 20y_e/acc_brochure2015_e.pdf [https://perma.cc/F3BF-PZKK]. lenging questions about the future of U.S. trade policy toward Iran. WTO accession for Iran would likely take many years and significant changes in Iranian require policies. gage in formal consultations with the United States about the sanc- tions it felt violated WTO commitments. cial Concessions from U.S. 252 eign policy interests may shift in support NYUof Iranian ready, accession. ANNUALthe Al- EU has voiced SURVEY its support for Iran’s OFbid for accession. AMERICAN LAW [Vol. 73:243 \\jciprod01\productn\N\NYS\73-2\NYS203.txt unknown Seq: 10 22-MAY-18 12:31 the DSB, which has sole authority to establish panels of experts to not to discriminate against each other’s trade, favor their own prod- own their favor trade, other’s each against discriminate to not ucts over those of other members, tions or that continue limit non-tariff free restric- trade, subject to certain case, Iran exceptions. could raise complaints about three distinct trade restric- tions: (1) the U.S. embargo, which tween prohibits Iranian nearly and U.S. all entities; trade (2) the be- general licensing which regime, limits financing options for the small lowed category between the of United States trade and al- Iran; and (3) the secondary sanctions, which remain on the books in the United States either in force or waived but available as “snapback” provisions lates the if nuclear Iran agreement. vio- arise where international pressure compels the United States to ac- quiesce to Iran’s accession while the United States otherwise main- tains its current trade restrictions with Iran. WTO members commit consultations do not result in a mutually agreeable would then request solution, the Dispute Settlement Body (DSB) to establish Iran dispute. the on rule to experts of panel a cle/us-iran-nuclear-usa-idUSKCN0XD0E3 cle/us-iran-nuclear-usa-idUSKCN0XD0E3 [https://perma.cc/SNV8-UR6N]. ment of close to 300 items of domestic legislation WTO to satisfy WTO Accessions requirements. 40268-nys_73-2 Sheet No. 51 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 51 40268-nys_73-2 40268-nys_73-2 Sheet No. 52 Side A 05/23/2018 07:56:14 68 This “Most Favored Part III for a discussion of 66 The panel would assess the See infra 64 note 9, arts. XX, XI. note 9, art. I. This is the first principle of Article I of the GATT supra Most Favored Nation Status (Article I) 67 A claim by Iran against U.S. sanctions and secondary supra 65 Panels consist of three to five experts from different 63 Either side of a dispute can appeal a panel’s ruling. Appeals are “heard are Appeals ruling. panel’s a appeal can dispute a of side Either ; GATT, Id. Id. Id. Id. Id. Id. The first commitment of WTO members is to treat no mem- This paper focuses solely on the potential claims Iran could 66. GATT, 67. 68. 63. 64. 65. ber’s goods more favorably than any other’s. ship. Members of the Appellate Body have four-year terms. They have to be indi- viduals with recognized standing in the field of law affiliated and with international trade, any not government. The appeal can panel’s legal uphold, findings and modify, conclusions . or . reverse . . the The Dispute accept or Settlement reject the Body appeals has within 30 to days—and rejection is only possible by con- sensus.” by three members of a permanent seven-member Dispute Appellate Settlement Body Body set and up broadly by representing the the range of WTO member- and may be violated only with a valid exception. 2018] consider cases raised asserting violations of agreements overseen by the CAN U.S. WTO. SANCTIONS ON IRAN SURVIVE? 253 \\jciprod01\productn\N\NYS\73-2\NYS203.txt unknown Seq: 11 22-MAY-18 12:31 sanctions would likely implicate many, if not all, of ered the agreements. WTO-cov- raise under the GATT, which establishes some of the most founda- tional governing standards of WTO membership. GATT members agree not to discriminate against other members’ goods, favor their own producers, or maintain non-tariff barriers to trade. This considers whether Part each of the three U.S. trade restrictions violates these GATT principles. The next Part discusses whether U.S. policies might nevertheless be violating excused because they fall within recognized exceptions to the GATT. countries countries “who examine the evidence and decide who is right and who is wrong. The panel’s report is passed to the DSB, only which reject can the report by consensus.” relevant exceptions. legitimacy legitimacy of the challenged trade practice—in this case, the embargo, U.S. general licensing regimes, and “snapback” suspensions of secondary sanctions—informed by past precedent of the DSB Ap- Body. pellate Nation” (MFN) commitment applies to all customs duties, charges, advantages, favors, privileges, or immunities and ensures that prod- ucts are not treated more or less favorably simply because of their national origin. 40268-nys_73-2 Sheet No. 52 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 52 40268-nys_73-2 40268-nys_73-2 Sheet No. 52 Side B 05/23/2018 07:56:14 rais- 70 While pistachios and 69 Canada–CertainAutomotive the Affecting Measures 71 Appellate Body Report, Body Appellate Id. See , § 25, WTO Doc. WT/DS139/AB/R (2000) (finding import regime grant- The secondary sanctions raise more difficult questions. Iran ar- The The U.S. embargo on products from Iran violates this MFN Iran could further argue that limitations on financing that ap- 70. 71. 69.§C.F.R. 31 benefi- of favor in credit of letters (authorizing (2016) 560.535 gues that the existence of the secondary sanctions, whether waived or in force, inhibit trade because companies fear being cut off from the U.S. market should the United laws, States resulting choose in to de enforce facto the discrimination against Iran even when commitment commitment on its face: goods and services from Iran from are U.S. markets barred solely on the basis of their national origin. Like products from other WTO members than Iranian products are on the face of the policy in treated clear violation of more favorably Article I of the GATT. ply uniquely to Iranian products and not like products from other WTO members violate the MFN treatment. ciaries in Iran for generally licensed activities “provided that such letters of credit are not advised, negotiated, paid or Iranian confirmed financial institution, by or any the other person Government whose property of and interests Iran, in property an are blocked pursuant to § 560.211”). 254 NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:243 \\jciprod01\productn\N\NYS\73-2\NYS203.txt unknown Seq: 12 22-MAY-18 12:31 carpets may be imported into the United States cense under general in li- the wake of the JCPOA, letters they of credit may issued, not advised, negotiated, be paid, financed or confirmed with by the government of Iran or any Iranian financial institution, clusively of importing the Iranian compared to other WTO-member imports. versions Prior WTO panels have of these products found as that commitments. such de facto discrimination violates MFN ing the costs of importation of these products as compared to like products from other countries without The United States limitations would argue that these on financing limitations are financing. not discrimination against the products on the basis of national ori- gin, but simply limitations on trade financing. may Any engage Iranian in entity trade with the United States for easily these as products entities as from any other nation; that trade it with letters of simply credit from cannot certain entities in finance Iran. How- ever, the de facto effect of this policy is to raise the cost nearly ex- Industry ing preferential treatment to a limited list of manufacturers constituted advantage de facto to countries principles). of a certain national origin and so violated MFN 40268-nys_73-2 Sheet No. 52 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 52 40268-nys_73-2 40268-nys_73-2 Sheet No. 53 Side A 05/23/2018 07:56:14 The 73 The U.S. 76 The embargo 74 note 30 (explaining the trig- However, the secondary 72 supra Quotas are specifically pro- 75 Kerry Seeks to Soothe European Bank Nerves over Iran note 9, art. III. Principle of National Treatment (Article III) supra David Brunnstrom, Overview of U.S. Sanctions on Iran, . at art. XI. See See Id Id. General Elimination of Quantitative Restrictions (Article XI) WTO members also commit to eliminate non-tariff barriers to Alongside a commitment to MFN treatment comes a commit- , Reuters (May 12, 2016), http://www.reuters.com/article/us-iran-banks- 72. 73. 74. GATT, 75. 76. 2018]the sanctions are officially unenforced. CAN U.S. SANCTIONS ON IRAN SURVIVE? 255 \\jciprod01\productn\N\NYS\73-2\NYS203.txt unknown Seq: 13 22-MAY-18 12:31 trade under Article XI of the GATT. ment not to impose internal regulations that result in tion discrimina- between domestic and foreign like products. hibited unless necessary to address a food modities, or shortage, enforce agricultural classify or fishing com- regulations. sanctions, sanctions, even when in force, are not imposed in creates national origin-based trade restrictions: they threaten or im- a manner that pose penalties indiscriminately on any individuals gaged in or trade with entities certain sectors en- of the Iranian economy. embargo imposes a clear quantitative restriction on products from mestic products. The secondary sanctions regime, as noted above, targets individuals and entities, not does products or not services, risk and discrimination so between products. domestic It is and unlikely that a foreign panel would like find that tions the regime U.S. violates sanc- Article III. satisfies the MFN commitment because every individual and entity risks the trade restrictions equally, regardless of national origin. precludes Iranian products from entering the United States in the first place and therefore is not likely to trigger Article III concerns about national treatment once products reach the The United limitations States. on general licenses apply before the the United goods States; the enter goods are subject to no additional treatment once they taxes arrive in the or United States as compared to do- immediate immediate penalties of the laws apply only to further third parties activities who have engaged by in transactions with or for Iranian- origin goods or services. It is discrimination based behavior, on antecedent not toward products or specific countries, and so likely Trade kerry-idUSKCN0Y30OJ [https://perma.cc/SQ52-8SEA] (banks refuse to work with Iran because of “remaining uncertainties” over sanctions liability). gers and penalties under U.S. secondary sanctions). 40268-nys_73-2 Sheet No. 53 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 53 40268-nys_73-2 40268-nys_73-2 Sheet No. 53 Side B 05/23/2018 07:56:14 , but 78 However, 77 note 29 (explaining the supra Kerry’s Peculiar Message about Iran for European Banks from trade with the United States. The threat of , Stuart Levey, e.g. Overview of U.S. Sanctions on Iran, , (May 12, 2016), http://www.wsj.com/articles/kerrys-peculiar-message- See See . J. T Iran would argue that the secondary sanctions also create S 77. 78. ALL W 256 Iran: zero. A total ban on products is a quantitative restriction and NYUso ANNUAL violates Article XI of SURVEYthe GATT. OF AMERICAN LAW quantitative restrictions [Vol. 73:243 on trade with Iran because any they trade with prohibit entire sectors of the Iranian economy. \\jciprod01\productn\N\NYS\73-2\NYS203.txt unknown Seq: 14 22-MAY-18 12:31 about-iran-for-european-banks-1463093348 [https://perma.cc/B2S6-X6M6] (op- ed by HSBC’s chief legal officer refusing to do business with Iran illegal so for long American as banks). it is scope of prohibited activity under U.S. secondary sanctions). This section does not discuss general licensing because the terms general provide for licensing specific quantities of regime trade between Iran does and the not United States and by is not intended its to induce policies in third countries. secondary sanctions are waived, there may not even be an argument an be even not may there waived, are sanctions secondary for inducement. Third countries that choose not to trade with Iran due to the waived sanctions future the of calculation risk a on based decisions making are books that still technically remain on threat of the the waivers expiring without renewal. substantive There evidence is real to and believe that the waivers temporary undermines the nature practical effects of of the their suspension, foreign individuals or entities that transact with certain sectors Iran, of including denying them access to the This U.S. financial enforcement system. mechanism is not a products; quantitative it applies on an individual-entity basis to restriction preclude certain on individual entities these penalties influences the decision-making of third countries in their dealings with Iran. Those third countries may impose quanti- tative restrictions in response to the secondary sanctions policy of the United States, which would violate Article XI, but States itself the has United not imposed such a restriction through the secon- dary sanctions. There is no U.S. policy creating striction in the secondary sanctions regime, just U.S. inducement of a quantitative re- quantitative restrictions imposed by other countries. And when the the secondary sanctions are directed at third-country nationals over whom the United States has no sovereignty. The United States has no authority to prohibit their behavior. Instead, the United States enforces the secondary sanctions by imposing trade restrictions on the individuals and countries declining to work with Iran under the are control not of the United States. 40268-nys_73-2 Sheet No. 53 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 53 40268-nys_73-2 40268-nys_73-2 Sheet No. 54 Side A 05/23/2018 07:56:14 The 79 There are ten general excep- 80 III. Likely Likely Do Not AND GENERAL LICENSES note 9, arts. XX, XXI. , World Trade Org., WTO Rules and Environmental Policies: supra EXCEPTIONS AUTHORIZING THE EMBARGO See, e.g. Id. This section considers the three exceptions that are most 81 The WTO recognizes that there are certain situations in which Since the United States does not have ultimate control over the over control ultimate have not does States United the Since 79. 80. GATT, 81. U.S. Direct Sanctions Violate the GATT; U.S. Secondary Sanctions national autonomy might conflict with GATT commitments. United States would be able to keep violating its its WTO obligations. However, the U.S. policies embargo certainly in place without violates both MFN prohibitions. The general commitments licensing limitations and MFN. likely To survive also the scrutiny quantitative of violate WTO dispute settlement, the restriction em- bargo and general licensing restrictions must be justified by an enu- merated exception to the GATT. The retain to States United the allow next might that GATT the to exceptions section considers the the embargo and general licensing restrictions despite their viola- tions of GATT principles. third-country trade policies implicated by its secondary sanctions re- sanctions secondary its by implicated policies trade third-country gime, the secondary sanctions regime likely do not violate the formal bounds of Articles I, III, or XI of the and its subsequent waiver GATT. If Iran challenged the secondary sanctions under these arti- cles, current case law indicates the challenge would fail and the passes the U.S. policies at issue, they are exempt from compliance with WTO rules and may be maintained without penalty. likely to encompass the U.S. embargo and general licensing regime for Iranian trade: the Article XX Public Morals and Life and Health exceptions and the Article XXI National Security exception. If the WTO panel finds that any one of these exceptions properly encom- GATT Exceptions, https://www.wto.org/english/tratop_e/envir_e/envt_rules_ex ceptions_e.htm [https://perma.cc/R9LJ-BGGX]. 2018] CAN U.S. SANCTIONS ON IRAN SURVIVE? 257 \\jciprod01\productn\N\NYS\73-2\NYS203.txt unknown Seq: 15 22-MAY-18 12:31 GATT therefore recognizes a series of exceptions that, if satisfied, exempt members from GATT rules. tions under Article XX and six security XXI. exceptions under Article 40268-nys_73-2 Sheet No. 54 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 54 40268-nys_73-2 40268-nys_73-2 Sheet No. 54 Side B 05/23/2018 07:56:14 EC Seal Products Only if all three 85 Finally, the measure must 84 , ¶ 5.199, WTO Doc. WT/DS400/AB/R European Communities–Measures Prohibiting the Im- “Members should be given some scope to 88 United States–Standards for Reformulated and Conventional Gas- Health Exception (Article XX(b)) The Appellate Body rejected the idea that mea- note 9, art. XX(a), (b). While the substantive requirements of these two 87 82 supra It must establish that the policy justifying the measure can an otherwise GATT-offending measure be 86 83 at ¶ 5.201. Id. Id. Id. Id. Article Article XX: Public Morals and Life and Health Exceptions The first step is to determine whether the measure at issue is Article XX(a) exempts measures “necessary to protect public 82. GATT, 83. Panel Report, 84. 85. 86. 87. Appellate Body Report, 88. , WTO Doc. WT/DS2/R (adopted Jan. 29, 1996). The Scope of the Public Morals Exceptions (Article XX(a)) and Life and case. The Appellate Body accepted the standard applied by the designed to promote an objective that falls within the scope of the exception. In 2014, the DSB Appellate Body explained the appro- priate scope of the public morals exception in the panel that objectives are legitimate under the public morals prong where they reflect standards of right and wrong within the regulat- ing community. fell within the range of policies designed to meet the enumerated objective—either public morals animal, or plant life or health—and the offending measure must be or the necessary to fulfill that policy objective. protection of human, morals” from the requirements of the GATT, while Article XX(b) exempts measures “necessary to protect human, animal, life or or plant health.” oline 258 NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:243 \\jciprod01\productn\N\NYS\73-2\NYS203.txt unknown Seq: 16 22-MAY-18 12:31 exception. exceptions exceptions differ, they impose parallel evidentiary burdens and re- quire similar levels of justification before granting the exception’s protection to a measure. The defending party bears the burden of proving that its offending measure comes within the scope of an be shown to conform with the clause, also known as requirements the chapeau, of Article XX. of the introductory requirements are met—scope, necessity, and compliance with the chapeau— exempted. portation and Marketing of Seal (adopted May 22, Products 2014). sures must establish a community’s legitimate ordinary threat tolerance above of and under moral the exception. beyond harms the to be justified 40268-nys_73-2 Sheet No. 54 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 54 40268-nys_73-2 40268-nys_73-2 Sheet No. 55 Side A 05/23/2018 07:56:14 A 93 Expert 92 Moreover, EC Seal Prod- 89 The history of 90 European Communities–Mea- , WTO Doc. WT/DS135/AB/ 94 European Communities–Measures Affecting , ¶ 162, WTO Doc. WT/DS135/AB/R , ¶ 5.197, WTO Doc. WT/DS400/AB/R The implication of the 91 European Communities–Measures Prohibiting the Im- , ¶ 3.292, WTO Doc. WT/DS285/R (adopted Nov. 10, United States–Measures Affecting the Cross-Border Supply of Gam- , Appellate Body Report, at ¶ 5.199. at ¶ 5.200. at ¶ 163. Id. Id. See, e.g. Id. Against What Risks Are the U.S. Policies Designed to Protect? Both the U.S. embargo and the general licensing restrictions In contrast to the public morals exception, the Appellate Body decision, in light of the history of the exception, is that, to fall 89. 90. 91. Panel Report, 92. Appellate Body Report, 93. 94. are designed under U.S. law as a means regime of depriving of the Iranian funds that human rights violations, as well as could a signal of American intolerance be used to support terrorism and 2018] define and apply for themselves the concept of cording CAN public U.S. morals SANCTIONS to ON ac- IRAN SURVIVE? their own systems and scales of values.” 259 \\jciprod01\productn\N\NYS\73-2\NYS203.txt unknown Seq: 17 22-MAY-18 12:31 the analogous measure in the “measures to curb obscenity.” GATS was interpreted to include public morals exceptions within the scope of WTO this reinforces interpretation. the Analyzing a broad General similar Agreement provision on in Trade the in Services (GATS), noted that a the WTO original public panel morals exception in the “well-understood” GATT was to include restrictions on lottery tickets, while ucts within the scope of the public morals exception, a measure simply must have been designed to protect a moral concern of the regulat- ing community. tends to interpret the exception for human, animal, and or health plant as life requiring some demonstration of actual and health risk in order to for a life measure to fall within its scope. and empirical evidence can be used to establish such a risk. “members “members may set different sponding limits to of similar interests protection of moral even concern.” when re- measure designed to protect against such a risk will fall within the scope of the Article XX(b) exception. bling and Betting Services portation and Marketing of Seal Products 2004). (adopted May 22, 2014) (citing Appellate Body Report, sures Affecting Asbestos and Asbestos-Containing Products R (2001)). Asbestos and Asbestos-Containing Products (2001) (finding appropriate reliance on expert witness evidence and international body findings in determining a health risk existed from asbestos). 40268-nys_73-2 Sheet No. 55 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 55 40268-nys_73-2 40268-nys_73-2 Sheet No. 55 Side B 05/23/2018 07:56:14 97 100 However, trade (2016), http://www Iran openly sup- 96 (Oct. 25, 2007), https:/ 2007), 25, (Oct. 99 ERRORISM REASURY T T The U.S. Defense Depart- 101 98 T OF THE ’ PONSORS OF EP S Iran Deploys Army to Bolster Support for Syrian Presi- TATE U.S. D U.S. , , S TATE Before the JCPOA, Iran’s nuclear program was S 95 T OF ’ , Press Release, U.S. Dep’t of the Treasury, Treasury Sanctions , Iran Sanctions Act of 1996 § 3, 50 U.S.C. § 1701 (2012) (“The , Iran Sanctions Act of 1996 §2, 50 U.S.C. § 1701 (2012) (“The EP (Apr. 16, 2016), http://www.ft.com/intl/cms/s/0/1e8910d4-0194- 2016), 16, (Apr. e.g. , IMES Fact Sheet: Designation of Iranian Entities and Individuals for Proliferation Ac- U.S. D See See, e.g. See, e.g. . T . IN The United States considers only three countries to be state F 101. 95. 100. Najmeh Bozorgmehr, 96. 97. Prohibiting Imports from Iran, Exec. Order No. 12,613, 52 98. Fed. Reg. 99. , sponsors sponsors of terrorism: Iran, Sudan, and Syria. 11e6-99cb-83242733f755.html#axzz48Y6ZE6kG [https://perma.cc/F2C9-5QFT]. Terrorism for Support and tivities The elite Quds Force within the Iranian Revolutionary Guard Corps Guard Revolutionary Iranian the within Force Quds elite The was designated by the U.S. Treasury Department in 2007 for its sup- port of the Taliban in Afghanistan. 260of such behavior. NYU ANNUAL SURVEY OF AMERICAN LAWand continue in the wake [Vol. of 73:243 the JCPOA so long lizing as behavior does Iran’s not destabi- change. \\jciprod01\productn\N\NYS\73-2\NYS203.txt unknown Seq: 18 22-MAY-18 12:31 also a core justification for the U.S. embargo. sanctions sanctions on Iran predate concerns about the nuclear program government, another state sponsor of terrorism, in its civil war. ports Hezbollah, a designated terrorist organization under U.S. law, and is actively providing troops and resources to bolster the Syrian /www.treasury.gov/press-center/press-releases/Pages/hp644.aspx [https://perma .cc/U6T4-PDTV]. ment attributes at least 500 American troop deaths in the past .state.gov/j/ct/list/c14151.htm [https://perma.cc/JY9T-TQ7A]. dent ability to continue to oppress the people of efforts Iran made . by . . the fully people and of publicly Iran support doms to . . promote . the [and] help establishment the of people of basic Iran produce, free- freely access, and safely.”) and share information objective of preventing the proliferation of weapons of mass destruction and acts of international terrorism through existing multilateral and bilateral initiatives re- quires additional efforts to deny Iran the financial chemical, means biological, and to missile weapons sustain programs.”). its nuclear, 41940 (Oct. 29, 1987). Congress declares that it is the policy of the United States to deny Iran the ability to support acts of international terrorism.”); Iran Freedom and Counterprolifera- tion Act of 2012 § 8802, 22 U.S.C. §of 95 (2012) the (“Congress United finds that States the and interests international peace are threatened by the destabilizing ongoing actions and of the Government of Iran, including its massive, systematic, and extraordinary violations of the human rights of its own citizens . . . . sense It of Congress is that the the United States should deny the Government of Iran the Those Involved in Ballistic Missile Procurement (Jan. 17, 2016) (on thor) file (announcing with au- the imposition of sanctions on missile procurement). Iranians involved in ballistic 40268-nys_73-2 Sheet No. 55 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 55 40268-nys_73-2 40268-nys_73-2 Sheet No. 56 Side A 05/23/2018 07:56:14 RAC- (Apr. P IGHTS EUTERS R R The leaders The , (Mar. 24, 2016), The U.S. De- 102 UMAN 104 Newspapers have H 105 CONOMIST E Iran Linked to Death of 500 U.S. HE EPORTS ON T , for 2015 found that the Ira- R , https://www.amnesty.org/en/coun- Muslim Nations Accuse Iran of Supporting (Apr. 15, 2016), http://uk.reuters.com/ OUNTRY , C EUTERS RAN (July 14, 2015), http://www.militarytimes.com/ 2016/2017 R , I , RAN Homosexuality is a crime and gay Iranians IMES TATE , I T While there are legitimate international dis- 106 L S ’ Human Rights Reports 103 NT T OF ’ The EU, even as it repairs relations with Iran, has I ILITARY EP M 108 2 http://www.state.gov/j/drl/rls/hrrpt/humanrightsreport/index , 109 at 40. . at 16, 19, and 43, respectively. MNESTY Id A U.S. D EU Prolongs Sanctions on Iran over Human Rights Violations Id. Human Rights in Iran Are Still Atrocious 2015 Iran continues its repressive policies even as it makes over- 107 Iran’s human rights record also remains concerning. Amnesty 106. 102. Andrew deGrandpre & Andrew Tilghman, 103. Yesim Dikmen & Melih Aslan, 104. 105. 109. 107. 108. TICES FOR .htm?year=2015&dlid=252923 [https://perma.cc/N6L5-8JZ4]. in Afghanistan also raised serious concerns violations.” in light of “serious human rights 2018] decade to Iran’s support for anti-American militants. CAN U.S. SANCTIONS ON IRAN SURVIVE? 261 \\jciprod01\productn\N\NYS\73-2\NYS203.txt unknown Seq: 19 22-MAY-18 12:31 story/military/capitol-hill/2015/07/14/iran-linked-to-deaths-of-500-us-troops-in- iraq-afghanistan/30131097 [https://perma.cc/PUK5-4PXA]. tures to the cooperation. international community in trade and nuclear article/us-turkey-summit-idUKKCN0XC1LQ article/us-turkey-summit-idUKKCN0XC1LQ [https://perma.cc/ERF4-R797]. tries/middle-east-and-north-africa/iran/report-iran [https://perma.cc/ZKK8- Q3L2]. partment of State nian government or its agents engaged killings” in and “arbitrary politically motivated or abductions. unlawful are subject to arrest and tody. invasive, humiliating treatment in cus- http://www.economist.com/news/middle-east-and-africa/21695716-while-iran-re- opens-west-repression-still-prevails-home-human-rights [https://perma.cc/RQQ7- X8XJ]. religious belief, arresting and others after grossly imprisoning unfair trials peaceful before Revolutionary Courts. critics Tor- ture and and other ill-treatment of detainees remained widespread, common and were and committed with impunity.” putes about the definition of terrorist organizations, under Ameri- can definitions, Iran remains an active proponent and purveyor of resources to terrorist causes. International reports that in rights to 2016 freedom of expression, association, peaceful assembly and Iran “heavily suppressed the Terrorism: Summit Communique 11, 2017), https://www.reuters.com/article/us-iran-nuclear-eu/eu-prolongs-sanc- been closed, Internet access disrupted, and women many banned public from places. of more than fifty Muslim nations have accused Iran of supporting terrorism as well. 40268-nys_73-2 Sheet No. 56 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 56 40268-nys_73-2 40268-nys_73-2 Sheet No. 56 Side B 05/23/2018 07:56:14 case, 376–79 the re- (Jan. 16, AW 112 . J. L T The financ- S RADE 110 ALL T W , EC Seal Products NTERNATIONAL Under the broad, flexible , I 111 AUWELYN P OOST Americans Held or Missing in Iran & J to Human Life (Article XX(b)) Moral Moral Concerns (Article XX(a)) UZMAN G , Statement of Defense of the United States at 14, Iran v. United establish a nexus between Iran’s human rights violations NDREW The U.S. Policies Are Designed to Protect Against U.S. A Id. See, e.g. 113 The U.S. Policies Are Designed to Protect against Actual Risk The public record of Iran’s support for terrorism and egre- Distaste for human rights violations and terrorism is a well-es- 111. 112. 110. 113. Felicia Schwartz, protect against such a risk. While there are debates as to the extent and life human of protection the to extends exception this which to health beyond the jurisdiction of the defending member, gious human rights violations also establishes an existing threat to human life and health. The U.S. embargo and limitations seek to the United States could persuasively establish that strictive these policies trade-re- are designed to American protect community, a so long moral as Iran’s interest policies have of not tively the substan- changed by the time of WTO accession. tablished tablished American value that speaks to the core of the community’s American standards of right and wrong. The U.S. embargo has been justified on these grounds since its inception. Iran’s allegations, the measures described in the previous sections have been taken by the United States . . . . to convince Iran to modify its unlawful behavior toward the United States and other governments, particularly with respect to its support for international terrorism.”). tions-on-iran-over-human-rights-violations-idUSKBN17D1U1 tions-on-iran-over-human-rights-violations-idUSKBN17D1U1 [https://perma.cc/ X4EQ-A95K]. States (Iran-U.S. Cl. Trib, 1997) (Claim No. ments/organization/65779.pdf A/30), http://www.state.gov/docu- [https://perma.cc/SG8K-4CF5] (“Contrary to 262 NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:243 \\jciprod01\productn\N\NYS\73-2\NYS203.txt unknown Seq: 20 22-MAY-18 12:31 and American national interest. However, unlike the public morals definition of public morals established by the ism and human rights violations. ing restrictions on the general licenses are a logical extension of the of extension logical a are licenses general the on restrictions ing long-standing U.S. policy to deprive Iran’s government and finan- cial sector of legitimacy and funding given their support for terror- 2016), http://www.wsj.com/articles/the-americans-held-missing-in-iran-1452956 704 [https://perma.cc/BJ88-AACS]. (2d ed. 2012). cord of Iranian responsibility for the lishes deaths a of legitimate Americans risk estab- of terrorism Further, within the American recent jurisdiction. detentions of Americans in process Iran without due 40268-nys_73-2 Sheet No. 56 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 56 40268-nys_73-2 40268-nys_73-2 Sheet No. 57 Side A 05/23/2018 07:56:14 , that Appel- 114 First, the see also , ¶ 156, WTO 117 , ¶ 2.3.3.2, WTO Doc. WT/ European Communities–Measures A measure is “necessary” when it , ¶¶ 306–08, WTO Doc. PP296-99, WT/ 115 European Communities–Measures Affecting Asbes- United States–Measures Affecting the Cross-Border Then, the panel should weigh and bal- , WTO Doc. WT/DS135/AB/R (adopted Mar. Finally, the panel will compare the Brazil–Measures Affecting Import of Retreaded Tyres 118 119 Korea–Measures Affecting Imports of Fresh, Chilled, and Fro- Necessity under Article XX The Appellate Body established a three-prong 116 Brazil–Measures Affecting Imports of Retreaded Tyres Appellate Body Report, See Id. Id. , ¶ 161, WTO Doc. WT/DS161.AB/R (adopted July 31, 2000). Having established policy objectives within the scope of Article Within the scope of either Article XX(a) or Article XX(b), the 115. 114. Appellate Body, 116. Appellate Body Report, 117. Appellate Body Report, 118. 119. tos and Asbestos-Containing Products 12, 2001) (defining necessary in an Article XX(b) determination); XX exceptions, the second step is then to determine if the measure is necessary for the objective for which it was designed. “Necessary” was first defined in the context of Article XX(d) exceptions; zen Beef late Body Report, sition to terrorism and human rights violations in U.S. trade policy. 2018] exception, which is Iranian establishing evidence empirical and expert U.S. the counter CAN a U.S. SANCTIONS ON IRAN subjective SURVIVE? standard, responsibility Iran for U.S. could deaths with its seek own panel would experts have to to and decide which data. data to The credit. animating objective of 263 the U.S. embargo and general licensing re- strictions is to inhibit Iran’s human rights violations. Under Article XX(a) the trade restrictions state sponsorship of terrorism promote the added objective of signaling American and values in oppo- \\jciprod01\productn\N\NYS\73-2\NYS203.txt unknown Seq: 21 22-MAY-18 12:31 challenged measure and alternatives to determine whether “an- is indispensable or makes a material contribution to an established policy objective. Prohibiting the Importation and Marketing of Seal Products DS400/AB/R (adopted May 22, 2014) (applying “necessary” in an Article XX(a) determination). ¶¶ 141, 150, WTO Doc. WT/DS332/AB/R (adopted Dec. 17, 2007). ance other relevant factors, including the contribution of the mea- sure to the objective versus the restrictive impact of the measure on international commerce. Doc. WT/DS332/AB/R (adopted Dec. 17, 2007) (applying “necessary” in an Arti- cle XX(b) determination); Appellate Body Report, test for how “necessary” a measure is to an objective. definition was subsequently applied to determinations of the scope of both Article XX(a) and (b). furthered by the measure. the by furthered panel must assess the relative importance of the interests or values Supply of Gambling and Betting DS285/AB/R (adopted Apr. Services 7, 2005). 40268-nys_73-2 Sheet No. 57 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 57 40268-nys_73-2 40268-nys_73-2 Sheet No. 57 Side B 05/23/2018 07:56:14 The 120 , http://www establish in- 124 ATIONS N NITED U , (2016), http://www.un.org/en/ Given this wide scope, 122 ATIONS N NITED U , and human rights violations U.S. Restrictions on Iran 123 Terrorism and Human Rights 121 at ¶ 310. at ¶ 298. Assessing Assessing the Importance of the Interests Furthered by Id. Id. Id. United Nations Action to Counter Terrorism Protect Human Rights Weighing the Contribution of the U.S. Measures to Inhibiting The United States would then have to show that the U.S. em- There is little question that the twin goals of inhibiting state 120. 121. 122. 123. 124. deemed important interests in the first prong of the “necessity” test for both public morals and human life and health. While little there guidance is on how panels assess the relative importance of in- terests, a panel found maintaining public order to be a legitimate public morals interest in an analogous GATS case, along with com- batting money laundering, organized crime, fraud, underage gam- bling, and pathological gambling. sponsorship of terrorism and human rights violations would be bargo and general license restrictions make a contribution significant to enough these weighty interests GATT to requirements. justify This exception analysis from involves and a balancing exercise ‘that involves putting all the variables of “‘holistic’the weighing equation together and evaluating them in relation after having examined them individually, to in order to reach an over- each other 264 other, WTO-consistent measure is NYU ‘reasonably available.’” ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:243 \\jciprod01\productn\N\NYS\73-2\NYS203.txt unknown Seq: 22 22-MAY-18 12:31 sections/what-we-do/protect-human-rights/index.html [https://perma.cc/QK2Y- RF76]. .un.org/en/counterterrorism/index.shtml [https://perma.cc/E3PL-MGG8]. would likely consider them relatively important for Article except. XX to ternational credibility to the concerns, indicating that the panels terrorism (which directly threatens lives and political orders) and human rights violations (including torture) would likely be recog- nized as important moral concerns to protect threats against to human established life and health. The proliferation of UN actions to counter terrorism challenging challenging party alternatives. bears the burden of identifying the 40268-nys_73-2 Sheet No. 57 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 57 40268-nys_73-2 40268-nys_73-2 Sheet No. 58 Side A 05/23/2018 07:56:14 , Sanctions Against Russia Efficient Enforcement in Inter- that poses risks to pub- Instead it seeks to impact A panel could accept less 129 127 product (Dec. 10, 2015), http://www.nytimes IMES , ¶¶ 296–99, WTO Doc. PP296-99, WT/ The general license restrictions, in , ¶¶ 5.215–16, WTO Doc. WT/DS400/AB/R 126 United States–Measures Affecting the Cross-Border European Communities–Measures Affecting Asbestos Brazil–Measures Affecting Import of Retreaded Tyres European Communities–Measures Prohibiting the Im- N.Y. T , However, the United States can point to , ¶ 157, WTO Doc. WT/DS135/AB/R (adopted 375 (2012) (arguing sanctions are costly, difficult, , the Appellate Body recognized that mate- that recognized Body Appellate the , L. 130 L ’ Kathyrn Stoner-Weiss, Opinion, NT with The U.S. embargo would constitute a total ban . J. I 125 Anu Bradford & Omri Ben-Shahar, HI C or human life and health. at ¶ 5.225. , 12 128 EC Seal Products Seal EC Id. Compare Unlike prior Article XX cases before the WTO, the U.S. trade 125. Appellate Body Report, 128. 129. Appellate Body Report, 130. 126. Appellate Body Report, 127. Appellate Body Report, riality may not always be required when a measure’s tiveness trade is less than restric- a total import ban. achievement of its objective.” 2018]all judgment.’” on CAN trade U.S. SANCTIONS from ON another IRAN WTO SURVIVE?member—an extreme restriction on international commerce—so in the balance its contribution to the goal ought to be well established and material sure. to justify The the Appellate mea- Body recognizes that duces “when restrictive 265 a effects measure on pro- international trade resulting from an import ban, as it appears to us that it would be diffi- severe as those cult for a panel to find that measure necessary unless it is satisfied that the measure is apt to make a material contribution to the \\jciprod01\productn\N\NYS\73-2\NYS203.txt unknown Seq: 23 22-MAY-18 12:31 than a material contribution from the general license restrictions as “necessary” in light commerce. of their limited effect embargo does not target a particular on international lic morals and often ineffective), Are Working, Don’t Give Them Up (adopted May 22, 2014). and Asbestos-Containing Products Mar. 12, 2001). national Law Supply of Gambling and Betting DS285/AB/R (adopted Apr. Services 7, 2005). ¶ 150, WTO Doc. WT/DS332/AB/R (adopted Dec. 17, 2007). portation and Marketing of Seal Products another nation state’s behavior through sure. general The nexus between economic the trade pres- restriction and the asbestos of challenged effects health the than established clearly less is behavior or the animal cruelty involved in seal products, and ness of sanctions regimes the to actually change effective- the targeted state’s be- havior is hotly debated. contrast, impose at most where occasional Iranian exporters do not have non-Iranian additional banking relation- transaction costs ships through which to In States. finance their shipments to the United .com/roomfordebate/2015/12/10/trade-an-end-to-sanctions-for-putins-help- 40268-nys_73-2 Sheet No. 58 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 58 40268-nys_73-2 40268-nys_73-2 Sheet No. 58 Side B 05/23/2018 07:56:14 and food and (Feb. 8, 2012), , The Hill (Aug. (Mar. 21, 2014), 134 ONITOR . M ROOKINGS B CI Iran Unable to Get Life-Saving (Jan. 13, 2013), http://www , S Sanctions on Iran: Iranians Face UARDIAN HRISTIAN G C , HE Why “Iran Style” Sanctions Worked Against Te- T All the U.S. embargo does on its own , The Iran Deal is a Victory for Reason and Economic 132 rickety passenger jets, passenger rickety (Sept. 3, 2015), http://www.newyorker.com/news/ Sanctions Cause Iranian Airplane Crashes 133 ORKER Y EW , John Cassidy, , Suzanne Maloney, N have created risks to human lives and health in Iran HE 131 135 T See, e.g. See, e.g. , Iran may respond that the duration of the U.S. trade embargo 131. 132. 134. Amri Handjani, 135. Niluksi Koswanage & Parisa Hafezi, 133. Julian Borger & Saeed Kamali Dehghan, embargo no longer operates as pressure on the regime. The effec- tiveness of sanctions in bringing about the JCPOA lay in the trade policies of third countries. undermines its validity as a tool for change: the has Iranian adapted economy to the effects of preclusion from U.S. markets so the against-isis/sanctions-against-russia-are-working-dont-give-them-up against-isis/sanctions-against-russia-are-working-dont-give-them-up [https://perma .cc/T6CF-LFER] (arguing the U.S. calculus). sanctions against Russia are changing its Sanctions john-cassidy/the-iran-deal-is-a-victory-for-reason-and-economic-sanctions [https:// perma.cc/8E39-Z22B] (arguing Iran deal vindicates sanctions regime). hran (and Why They Might Not Succeed with Moscow 266the JCPOA as evidence that sanctions can result in positive change NYUin Iran’s ANNUAL policies, even if their general effectiveness is questionable. SURVEY OFThe AMERICAN Iranian LAW nuclear agreement grew nomic out pressure that of international [Vol. the sanctions 73:243 placed enormous on Iran’s eco- ernment gov- to change its demands. nuclear program to meet international \\jciprod01\productn\N\NYS\73-2\NYS203.txt unknown Seq: 24 22-MAY-18 12:31 .theguardian.com/world/2013/jan/13/iran-lifesaving-drugs-international-sanc- tions [https://perma.cc/L6D9-M3C4]. 20, 2014), tions-cause-iranian-airplane-crashes http://thehill.com/blogs/congress-blog/foreign-policy/215406-sanc- [https://perma.cc/7MA6-FSRX]. http://www.csmonitor.com/World/Latest-News-Wires/2012/0208/Sanctions-on- over the last five years. http://www.brookings.edu/blogs/markaz/posts/2014/03/21-iran-sanctions-rus- sia-crimea-nuclear [https://perma.cc/YUS9-KT5Q] (arguing broad multilateral- ism was key to Iran sanctions pressure). is limit trade with no contribution to its stated objectives. The gov- ernment is not meaningfully constrained in providing weapons or resources to whomever it chooses because it the has U.S. fully market substituted with other international markets. the Iran Iran would embargo say is like the Cuba time that has embargo: lost its power and should be discarded. The only prac- a relic of an earlier tical effect of the U.S. embargo, besides significantly impairing free commerce, is to preclude life-saving U.S. products from Medicine Iranians. shortages, shortfalls Shortages of Rice, Corn, and Cooking Oil Drugs Due to International Sanctions 40268-nys_73-2 Sheet No. 58 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 58 40268-nys_73-2 40268-nys_73-2 Sheet No. 59 Side A 05/23/2018 07:56:14 note supra EC Seal Prod- However, the long 137 and most of those shortfalls 136 , ¶ 5.228, WTO Doc. WT/DS400/AB/R European Communities–Measures Prohibiting the Im- The The United States will respond that there are humanitarian ex- The general licensing restrictions similarly signal distaste, but, However, the United States can argue that the embargo also 136. Guidance Relating to the Lifting of Certain U.S. Sanctions, 137. Appellate Body Report, , a measure may be upheld if it is “capable of making and does ceptions ceptions to the U.S. embargo, and a safety to general protect against such harms, license for airplane Iran-Iranians-face-shortages-of-rice-corn-and-cooking-oil Iran-Iranians-face-shortages-of-rice-corn-and-cooking-oil [https://perma.cc/FB7N- U6KB]. 41, at 29. portation and Marketing of Seal (adopted May 22, Products 2014). 2018] CAN U.S. SANCTIONS ON IRAN SURVIVE? 267 \\jciprod01\productn\N\NYS\73-2\NYS203.txt unknown Seq: 25 22-MAY-18 12:31 ucts make some contribution to its objective.” were the result of international sanctions that will be lifted the under JCPOA. That these shortfalls will be resolved through renewed international trade strengthens Iran’s argument that the U.S. em- bargo does no work as a pressure tool in itself: Iran can get thing every- it needs determination of contributions to an objective. Under elsewhere. The WTO is fairly flexible on its the activities the United States wants to inhibit. The financing limi- The value of this signal does not fade over time and does not on rely proof of effects on Iranian behavior. The steady consistency of U.S. messaging over the past thirty years establishes that taking this symbolic stand against Iran’s behavior is central to the U.S. concep- tion of itself as a bastion of freedom and human rights, regardless of whether Iran changes. The U.S. embargo may not be making a demonstrable contribution to the objective of inhibiting terrorism and human rights violations, but it helps values signal to the deeply world under held Article XX(a). U.S. in contrast to the embargo, also likely exert pressure on Iran. They cause immediate complications for Iranian enter a exporters new market seeking and to deny a revenue stream to participants in track record of the U.S. embargo failing to effect change in Iran’s policies over decades makes it hard to believe a that panel the could U.S. find embargo meets such a standard objective of inhibiting terrorism and human with rights violations under respect to the Articles XX(a) and XX(b). serves the non-instrumental purpose of incorporating core Ameri- can values in opposition to terrorism and human rights violations into its trade policy. changes Iran’s Regardless behavior, it is of important that the whether United States clines de- the to policy contribute its actually own resources to Iran’s nefarious causes. 40268-nys_73-2 Sheet No. 59 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 59 40268-nys_73-2 40268-nys_73-2 Sheet No. 59 Side B 05/23/2018 07:56:14 Many 139 (Apr. 2, 2017), http:// RAN I EPUBLIC OF R Foreign Ministry Slams U.S. New Sanctions Against , European Communities–Measures Affecting Asbestos SLAMIC , ¶¶ 172–74, WTO Doc. WT/DS135/AB/R ., I FF See, e.g. A OREIGN F In assessing the U.S. objective of inhibiting terrorism 138 INISTRY OF Once the responding party makes a prima facie case that its M 138. Appellate Body Report, 139. Iran frequently asserts that U.S. sanctions are contradictory to the spirit , Comparing the U.S. Measures to Less Trade-Restrictive Alternatives and Asbestos-Containing (adopted Products Mar. 12, 2001). and text of UN resolutions. Iran alternatives that would be as effective at furthering objective. Iran would be responsible for identifying alternatives, the if it identified so chooses. A reasonably available alternative (1) must be one the responding member is capable of taking, (2) does not difficul- technical substantial or costs prohibitive like burden undue impose an ties, and (3) must allow the member to achieve its desired level of protection. from revenue streams they would otherwise access deprives them of funds they could route toward more nefarious activities. These re- strictions demonstrate to Iran’s private sector that there is a market available, but Iran’s banks and without changes in their policies. The government general licensing restrictions may not participate plausibly could effect change in Iran’s behavior over time andnal sig- U.S. distaste for the behavior of Iran’s government and banks: both Article XX(a) and XX(b) exceptions could apply. trade restrictive measure is necessary to further its objective on bal- ance, the last step is to determine if there are less trade-restrictive 268 tations force exporters to find alternatives outside of Iran in order NYUto sell ANNUALto the United States, undermining the government’s control SURVEY OFover AMERICAN its LAW pistachio and carpet inhib- of objective asserted the and restrictions these between nexus industries. Iran will [Vol. 73:243 argue that iting the terrorism and human rights violations is even more than tenuous the general U.S. embargo: there is no pistachio and evidence carpet that financing has private any impact on the Iranian gov- ernment’s policies regarding torture or Hezbollah. United However, States will argue that precluding the government and the banks \\jciprod01\productn\N\NYS\73-2\NYS203.txt unknown Seq: 26 22-MAY-18 12:31 and human rights violations with its policies, Iran could argue that there already exist internationally recognized mechanisms to do so in response to demonstrated wrongs by individual parties: UN sanc- tions and aggressive financial sector compliance oversight. en.mfa.ir/index.aspx?fkeyid=&siteid=3&pageid=2025&newsview=438213 [https:// perma.cc/L73J-XRDN]. further this objective through diplomacy, oversight, and UN-ap- other countries share the U.S. concern about Iran’s behavior but 40268-nys_73-2 Sheet No. 59 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 59 40268-nys_73-2 40268-nys_73-2 Sheet No. 60 Side A 05/23/2018 07:56:14 Iran The 143 140 One of the 142 , ¶ 5.297, WTO Doc. WT/DS400/AB/R European Communities–Measures Prohibiting the Im- note 9, art. XX. Consistency with Article XX Chapeau supra 141 at ¶ 5.306. at ¶¶ 5.299–303. Id. Id. Once a measure has been found justified by an Article XX pro- A measure constitutes a means of arbitrary or unjustifiable dis- 140. GATT, 141. Appellate Body Report, 142. 143. manner which would constitute a means of able arbitrary discrimination or between unjustifi- countries where the same conditions prevail, or a disguised restriction on international trade.” visional exception, it still must be considered in light of arching the over- requirement that “such measures are not applied in a crimination when the relevant conditions that justify the restrictive measure are also present in member cannot other explain the difference satisfactorily. countries and the defending portation and Marketing of Seal (adopted May 22, Products 2014). cannot be forced to restart them by the WTO. Further, if one objec- tive of the restrictive measures is to signal U.S. intolerance of state sponsorship of terrorism and human rights bargo is violations, the only way to achieve that a goal. Only a total bar on full trade em- communicates that the United States refuses to be a party to effective less be also would such alternatives restrictive Less behavior. bad at signaling American values, needs. and so insufficient to fulfill U.S. 2018] proved actions, rather than blanket mechanisms CAN by U.S. national bans SANCTIONS origin. However, ON the IRAN on United SURVIVE?States will be trade or in, engages also it which mechanisms, other these that argue to able financing do not adequately replace the level of protection afforded U.S. embargo by and the the general licensing restrictions. The UN does not sanction all the entities the 269 United States considers bad actors, compliance sometimes fails, and diplomacy is not reasonably availa- ble given the current state of U.S. foreign policy: the United States does not have official relations with the government of Iran and \\jciprod01\productn\N\NYS\73-2\NYS203.txt unknown Seq: 27 22-MAY-18 12:31 burden of establishing that the measure does not conflict with the Article XX chapeau restrictions rests with the defending party—the United States. recon- be can discrimination the “whether is factors important most ciled with, or is rationally related to, the spect to which the measure has been provisionally justified.” policy objective with re- will argue that there is no compelling reason why they are subject to subject are they why reason compelling no is there that argue will a total embargo while other state sponsors of terrorism and human 40268-nys_73-2 Sheet No. 60 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 60 40268-nys_73-2 40268-nys_73-2 Sheet No. 60 Side B 05/23/2018 07:56:14 RTI- ANC- ANC- , U.S. S S (June YRIA UDAN However, , S GATT: A , S 148 LOOMBERG B , REASURY U.S. Relations with Su- REASURY a state sponsor of sponsor state a Sudan is also sub- T T 144 (2016), http://www.state NDEX OF THE both I T OF ’ T OF ’ TATE EP EP S T OF U.S. Relations with Syria Fact Sheet NALYTICAL ’ , U.S. D , U.S. D EP , A (2017), http://www.state.gov/r/pa/ei/bgn/ U.S. D ONTROL ONTROL , (2012), https://www.wto.org/english/res_e/ C C TATE ECRETARIAT Syria is subject to extensive sanctions but S SSET SSET Syria’s civil war complicates trade policy on Iran Spends Billions to Prop Up Assad 145 A A 146 T OF ’ XCEPTIONS WTO S 147 EP E OREIGN OREIGN Article XXI: National Security Exception F F , Eli Lake, U.S D (2013), https://www.treasury.gov/resource-center/sanctions/Pro- (2013), https://www.treasury.gov/resource-center/sanctions/Pro- OF OF , . . ECURITY FF FF State Sponsors of Terrorism O O See, e.g. ROGRAM ROGRAM The national security exception to the GATT in Article XXI(b) P P 144. 146. 147. 148. The WTO has published an interpretation and application of Article 145. XXI S terrorism terrorism and a human rights violator. share Only that status in two U.S. law: other Sudan and Syria. countries 5424.htm [https://perma.cc/HAW9-LX8V]; 5424.htm TIONS has not been litigated through the there WTO is no dispute case law mechanism, to predict so WTO implementation. CLE TIONS 270 rights violators are not. The United States will rebut that the trade NYU embargo is justified by Iran’s unique status as ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:243 \\jciprod01\productn\N\NYS\73-2\NYS203.txt unknown Seq: 28 22-MAY-18 12:31 grams/Documents/sudan.pdf [https://perma.cc/ED9Z-NEY4]. grams/Documents/syria.pdf [https://perma.cc/FG75-RCVM]. .gov/j/ct/list/c14151.htm [https://perma.cc/UG9U-6436].; dan Fact Sheet Dep’t of State (2014), http://www.state.gov/r/pa/ei/bgn/3580.htm [https://per ma.cc/YA7F-E2KS]. not a total embargo. proach to Syria is well justified by its internal the United instability. States has unique concerns about Iran’s behavior above Further, and beyond that of Sudan and Syria. Even after pling a international decade sanctions, of crip- Iran’s sheer capacity to support ter- rorism dwarfs the capabilities unique treatment. of Syria and Sudan and justifies a nation-to-nation basis because only some parts of the country are under the control of the state sponsoring terrorism. Syria is the na- tion being treated exceptionally, not Iran, and the different ap- The relevant text states: on the face of the text, the exception appears to grant broad discre- tion to member states to self-judge what actions fall within its scope. ject to a full embargo. 9, 2011), http://www.bloomberg.com/view/articles/2015-06-09/iran-spends-bil- lions-to-prop-up-assad [https://perma.cc/X2DF-G6QN] (quoting a U.N. estimating official Iran spends $6 billion annually propping up the Syrian regime). in members by invocation and drafting exception’s the of history the detailing XXI unilateral trade embargoes over the years. The historical gloss of the exception the that implied have it invoke who exception’s those indicates states member by use is broadly self-judging. booksp_e/gatt_ai_e/art21_e.pdf [https://perma.cc/R9WG-FGMB]. 40268-nys_73-2 Sheet No. 60 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 60 40268-nys_73-2 40268-nys_73-2 Sheet No. 61 Side A 05/23/2018 07:56:14 necessary; while the 149 considers IV. The Foreign Policy Essay: Could Energy Sanctions on THE UNITED STATES (May 4, 2014), https://www.lawfareblog.com/foreign-pol- note 9, art. XXI. supra , Jeff Colgan, AWFARE The U.S. embargo and licensing restrictions are then ALTERNATIVES TO A CLAIM AGAINST IRAN’S LIKELIHOOD OF SUCCESS AND L , 150 See, e.g. The prior analysis indicates that the United States could acqui- The secondary sanctions regime likely is not a violation of the State sponsorship of terrorism is rationally related to the traffic 149. GATT, 150. Nothing Nothing in this Agreement shall be construed . . . (b) to vent any contracting pre- party from taking any action which it con- siders necessary for the interests . protection . . (ii) of relating to its the and traffic implements of essential in war and arms, to such ammunition, traffic security in other goods and materials as is carried on directly or indirectly for the purpose of supplying a military establishment. GATT by the United States because the trade restrictions imposed by the United States do not target Iranian products or services. The United States simply restricts access to U.S. markets to any individ- ual anywhere in the world engaged in certain kinds of prohibited esce to Iran’s accession to the WTO without changing its trade poli- cies toward Iran. A direct challenge to U.S. sanctions policy by Iran would likely fail in WTO dispute settlement because even if deter- mined to be violations of the GATT, the sanctions likely would be considered excepted under Article XX(a) or Article XXI(b). well within an objective interpretation of “essential” security inter- ests. If the WTO applied the Article XX case law to necessity under Article XXI, the U.S. embargo might fail as insufficiently contribut- ing to the protection of U.S. security interests. protects any action which the member However, the text exception has never been formally would tested, many protect believe it measures likely threats like by WTO sanctions members regardless in of because it their leaves response the decision of necessity in actual the hands of the mem- track to record military ber states. in goods and materials for supplying a military establishment and 2018] CAN U.S. SANCTIONS ON IRAN SURVIVE? 271 \\jciprod01\productn\N\NYS\73-2\NYS203.txt unknown Seq: 29 22-MAY-18 12:31 icy-essay-could-energy-sanctions-russia-work [https://perma.cc/TK23-J48J]. likely also encompassed by the Article XXI(b) exception for mea- sures considered necessary to protect essential security interests re- lating to trade in military-related goods and services. Russia Work? 40268-nys_73-2 Sheet No. 61 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 61 40268-nys_73-2 40268-nys_73-2 Sheet No. 61 Side B 05/23/2018 07:56:14 However, Iran could use the WTO dispute settlement mecha- However, However, the U.S. embargo constitutes a de jure violation of based on government guidance, Iran can raise WTO claims against third countries for discriminating against would Iran. force countries to choose between Successful WTO compliance and ac- claims cess to U.S. markets, threatening the legitimacy of the WTO system simply because of a U.S. policy. Countries like always resisted China the U.S. and sanctions policy Turkey and will not appreciate be- because efficacy WTO risking or WTO the at it defend to forced ing contributing to the inhibition of Iran’s bad behavior and also signal U.S. intolerance. Iran’s unique status as a terror justifies singling it out for these restrictions. Even if the WTO stable state sponsor of declines to grant Article XX(a) tended protection to express a nation’s policy to without instrumental effect, the policies purely in- United States could likely successfully invoke the Article XXI(b) na- tional security exception to preserve its trade restrictions. nism to pressure the United States to change its regime indirectly. As noted above, foreign companies and banks with Iran, even in the wake of the JCPOA, out of fear that avoid the trans- transactions actions will run afoul of U.S. sanctions and cut them off U.S. from the financial markets. If Iran can establish these decisions are morals. They will say human life and health by the inhibiting Iran’s state sponsorship of ter- measures protect rorism and human rights public violations, and also protect public morals morals and by signaling U.S. intolerance for such activities. The U.S. embargo likely could not be justified as an Article XX(b) measure necessary for human life and health because its long-established history indi- cates that Iran has adapted to the lack of a U.S. market and so the measure no longer contributes to the objective of inhibiting Iran’s behaviors. However, the U.S. embargo would be justifiable Article under XX(a) as a signal of U.S. intolerance if the panel considers non-instrumental objectives like this validly within the scope of Arti- cle XX(a). The general licensing restrictions likely could be fied under justi- both Article XX(a) and (b) because they are capable of 272 behavior. The United States is not responsible for trade NYUrestrictive policies ANNUALthat third countries, individuals, SURVEY or entities adopt that OFtar- get AMERICANIran, even if those policies LAWare adopted to avoid U.S. penalties. [Vol. 73:243 Article I and Article XI, and the general licensing restrictions likely constitute a de facto violation of Article I. still These be measures beyond might Iran’s reach if they exception. are The United covered States will argue by that the an measures are nec- Article XX essary to protect human life and health and to protect public \\jciprod01\productn\N\NYS\73-2\NYS203.txt unknown Seq: 30 22-MAY-18 12:31 40268-nys_73-2 Sheet No. 61 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 61 40268-nys_73-2 40268-nys_73-2 Sheet No. 62 Side A 05/23/2018 07:56:14 Tur- IMES . T IN F , (Oct. 21, 2010), http:// IMES L.A. T , These countries would likely bring China Hits Out at US Sanctions on ZTE 151 , Charles Clover, See, e.g. WTO membership would be a significant step back into the 151. (Mar. 8, 2016), http://www.ft.com/intl/cms/s/0/1e060a62-e516-11e5-a09b-1f8b 0d268c39.html#axzz48puftNqr [https://perma.cc/A787-BJZQ]; Paul Richter, key Rebuffs U.S. Pressure to Slash Trade with Iran 2018]of American intransigence. CAN U.S. SANCTIONS ON IRAN SURVIVE? 273 \\jciprod01\productn\N\NYS\73-2\NYS203.txt unknown Seq: 31 22-MAY-18 12:31 stakes. American policymakers considering whether to acquiesce to Iranian membership will need to compliance with WTO balance agreements against the the need for continued benefits of sanctions to Iran’s combat terrorism and human rights violations. Even if U.S. sanctions do not directly conflict with the Iran’s WTO, membership they in might be politically costly. Thus, will while unlikely the bar GATT U.S. embargoes on Iran, come it a powerful may tool for nevertheless Iran to be- combat U.S. sanctions. diplomatic diplomatic pressure against the United States to tions regime change to avoid its an existential sanc- threat to the WTO. So even Iran if might not succeed in defanging direct the WTO U.S. litigation, it sanctions could still through leverage its WTO membership to neutralize the U.S. regime through targeted third-party claims. international community for Iran. threaten That the U.S. trade step policy toward Iran, but might it would change not its directly articles.latimes.com/2010/oct/21/world/la-fg-turkey-iran-20101021 [https://per ma.cc/Y6FN-8BQ8]. 40268-nys_73-2 Sheet No. 62 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 62 40268-nys_73-2 40268-nys_73-2 Sheet No. 62 Side B 05/23/2018 07:56:14 274 NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:243 \\jciprod01\productn\N\NYS\73-2\NYS203.txt unknown Seq: 32 22-MAY-18 12:31 40268-nys_73-2 Sheet No. 62 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 62 40268-nys_73-2 40268-nys_73-2 Sheet No. 63 Side A 05/23/2018 07:56:14 R R R R R R R R R R R R R R R R R R . . . . . 313 . . . . . 289 ...... 294 ...... 304 ...... 300 ...... 305 ...... 283 ...... 306 ...... 296 310 I...... 287 275 ...... 278 ...... 316 ADIN PEARL* INTRODUCTION ...... 280 ...... 313 ...... 275 ...... 321 and the Burden of Proof TORT TORT CLAIMS ACT: Contradicts Legislative History and ...... 278 AN OPTIMAL APPROACH Congressional Intent Gaubert States Sovereign Immunity Gaubert EXCEPTION EXCEPTION TO THE FEDERAL THE DISCRETIONARY FUNCTION B. C. The DFE Is an Affirmative Defense A. The Burden of Pleading B. The Burden of Proof A. Pleadings B. Motion to Dismiss A. Origins of Sovereign Immunity in the United B. The FTCA A. Jurisdictionality Jurisprudence for Waivers of B. Jurisdictionality Jurisprudence for the FTCA A. Until 1946, the doctrine of sovereign immunity posed an im- I. Introduction * NYU School of Law, Class of 2017 V. Justifying the Proposed Assignment II. Overview of the FTCA VI. How the Proposed Assignment Should Function IV. Overview of the DFE and the Burden of Proof III. Jurisdictionality Jurisprudence VII. Conclusion ASSIGNING ASSIGNING THE BURDEN OF PROOF FOR mense obstacle to courts persons for injuries seeking negligently caused by compensation federal governmental tion ac- through or the inaction. Because the notion that “the King can do no \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 1 22-MAY-18 12:55 40268-nys_73-2 Sheet No. 63 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 63 40268-nys_73-2 40268-nys_73-2 Sheet No. 63 Side B 05/23/2018 07:56:14 1201, . EV . L. R these claim- 1 TAN S , 53 In the decades following 4 Against Sovereign Immunity The Federal Tort Claims Act: A Proposal for Institutional 1538, 1541 (2000). . With this statute, Congress intended the fed- 2 EV . L. R OLUM 3 C Erwin Chemerinsky, See , 100 The DFE has become one of “[t]he most gaping and fre- In crafting the statute, Congress was aware of the potentially 1. 2. 28 U.S.C. § 1346(b) (2012 & Supp. 3.2016). 28 U.S.C. § 2680(a) (2012). 4. James R. Levine, Note, quently litigated” sections of the statute. 276 wrong” was by this time entrenched in American law, NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:275 \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 2 22-MAY-18 12:55 discretion. eral district courts’ doors to swing open for victims of the ment’s govern- torts and for experience, and knowledge the to award compensation. courts to use their authority, power, damaging effect that an unlimited waiver could of have on sovereign essential immunity governmental functions. As a result, gress included Con- in the FTCA a section—28 U.S.C. § 2680—detailing thirteen substantive areas in which form governmental the basis activity of a cannot viable tort claim against the section includes what has become known as government. the “discretionary func- This tion exception” (DFE), which essentially bars civil out liability of governmental conduct arising executed either pursuant to a statute or regulation or for which the agent or agency had policy ants ants could not obtain a remedy from the judicial system but rather were required to seek a private bill from “private Congress. bill The system” resulting was recognized to have become arbitrary and inefficient. To overhaul how the federal government compensates those whom it negligently injures—and to make it victims to obtain easier relief—Congress enacted the for Federal Tort Claims tort Act (FTCA) in 1946, waiving the sovereign immunity of the United States for tort claims. 1202 (2001) (“A doctrine derived from the English premise that ‘the King can do no wrong’ deserves no place in American law.”). enactment of the FTCA, federal courts engaged in an undisciplined and ultimately destructive greatly expanded the relief-limiting effect of the DFE. In particular, form of statutory federal courts have treated the exceptions for torts construction caused through that the government’s discretionary functions as a condition of judicial jurisdiction and not as a merits provision as it clearly is. One exam- ple of this flawed approach proof is for the the non-applicability of the assignment exception to of FTCA plaintiffs the as part of burden their general burden to invoke of the courts’ subject-matter jurisdiction. Reform 40268-nys_73-2 Sheet No. 63 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 63 40268-nys_73-2 40268-nys_73-2 Sheet No. 64 Side A 05/23/2018 07:56:14 in- 5 Third, this Note will pro- 7 Putting the Discretionary Function Excep- 91, 92 (2015) (demonstrating how the Supreme . EV . L. R Second, it will describe the evolution of jurisdic- 6 EMP Part II. Part III. T Thomas E. Bosworth, Comment, , 88 See See infra See infra This This conflation of merits conditions as an aspect of jurisdiction First, this Note will detail the origins of sovereign immunity Since the DFE is not jurisdictional, courts may no longer justify 5. 6. 7. tion in Its Proper Place: A Mature Claims Approach Act to “Jurisdictionality” and the Federal Tort is not limited to the interpretation of the FTCA. Indeed, commen- tators have noted a long trend in court decisions inflating the scope of jurisdiction to include simple claim processing rules and statutes of limitations. In recent years, the Supreme Court has attempted to bring discipline back to “jurisdictionality jurisprudence,” FTCA’s core, threshold section while treating all other sections, in- cluding the DFE, as non-jurisdictional. tionality jurisprudence under the guidance of the Supreme Court from “drive-by jurisdictional rulings” to the “clear-statement princi- ple” and how the current doctrine limits jurisdictionality to the 2018] DISCRETIONARY FUNCTION EXCEPTION 277 \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 3 22-MAY-18 12:55 Court’s “jurisdictionality jurisprudence” can be applied to the FTCA’s exceptions). burdens of proof play in pleading doctrine, assess why the burdens for some elements of claims under specific statutes are assigned to plaintiffs and others to defendants, and then apply those principles and structure, purpose, provision’s the mind in keeping DFE, the to test for application. This Note argues that to optimize FTCA litiga- tion and promote Congress’s goals of compensation, transparency, and deterrence, courts must treat the DFE as an affirmative defense and assign its burden of proof to the government. and the FTCA. has already shown its inclination to limit the jurisdictional label to the threshold provision of the FTCA while treating the tions other as simply sec- establishing the elements of a statutory cause of ac- tion. The DFE, along with the other substantive exceptions listed in § 2680, is not a jurisdictional prerequisite but rather a limit on tort claims against the government granted. for The Court’s clarifying which approach to judicial jurisdiction holds im- relief portant implications for the can scope and application of be the DFE and for how the burden of proof in alleging the existence of the excep- tion ought to be assigned. assigning the burden of proof for its non-applicability to the plain- role the examine must courts Instead, grounds. jurisdictional on tiff structing structing lower courts to limit jurisdictional characterization to only those statutory provisions Congress has clearly identified including as provisions such, in waivers of sovereign immunity. The Court 40268-nys_73-2 Sheet No. 64 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 64 40268-nys_73-2 40268-nys_73-2 Sheet No. 64 Side B 05/23/2018 07:56:14 . 8 M W , 50 note 1, at Scholars The Con- 10 11 supra Chemerisnky, 1275, 1283 (2002). . EV see also On the other hand, the emer- 13 . L. R II. DMIN A 9 note 10, at 1293 (“[S]ince the nation is ruled by the , 54 The Continuing Drift of Federal Sovereign Immunity “Nothing But Mischief”: The Federal Tort Claims Act and the note 10, at 1288; OVERVIEW OF THE FTCA supra supra the law, and (2) courts, as mere extensions of the Part IV. Part V. , Niles, 517, 528 (2008). . was EV Niles, A. Origins of Sovereign Immunity in the United States See See, e.g. On the one hand, the formalist approach to sovereign im- L. R See infra See infra 12 Long before enactment of the FTCA, sovereign immunity was a was immunity sovereign FTCA, the of enactment before Long 8. 9. 12. 10. Mark C. Niles, 13. 11. Gregory C. Sisk, ARY & M munity as practiced in royalist England appears to be a censure on the American democratic system. widely accepted principle in American law protecting government the from federal being sued in court prior governmental for consent. However, the American money origins of the claims without relied scholars legal centuries for England In disputed. are doctrine upon the maxim, “the King can do no wrong,” to support an abso- lutist notion of sovereign immunity encompassing two distinct con- cepts: (1) the Crown could not be subject to because suit in it courts of law Crown’s authority, could not limit the Crown’s activities. 278 vide an overview of NYU the now. until proof of burden its assigned have courts how and Court, ANNUAL DFE, its SURVEY interpretation OF by the Finally, this Note will propose AMERICANan optimal approach to assigning the Supreme LAWerroneously that approaches other rejecting proof, of burden DFE’s [Vol. 73:275 characterize the DFE as jurisdictional, ment to that bear the burden. compels the govern- \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 4 22-MAY-18 12:55 gence of something like sovereign immunity in the was United probably necessary States in order to empower the legislative and ex- Scope of Discretionary Immunity stitution did not expressly enshrine that the American government could not be sued for money claims absent consent, although both the Federalist Papers and Constitutional Convention discussed the idea. 1205 (“The text of the Constitution is silent about sovereign immunity.”). United States Constitution” and Article III specifically. debate whether sovereign immunity was an “accepted premise un- derlying—or instead intended casualt[y] of—the ratification of the law, and not by individuals, our courts indeed must should incur the not obligation, to determine only when the have acts of government the vio- authority, late but the law, and appropriate.”). to order remedies for the victims of such violations where 40268-nys_73-2 Sheet No. 64 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 64 40268-nys_73-2 40268-nys_73-2 Sheet No. 65 Side A 05/23/2018 07:56:14 S. , 51 Id. 467, 467 (1999) (cle- . L.J. , 106 U.S. 196 (1882), However, there remained a Regardless of the principle’s NTERDISC 18 14 . I AL The King’s Wrongs and the Federal District Courts: United States v. Lee note 11, at 526–27. “Although its powers are granted supra The Tucker Act was a seminal waiver of sovereign of waiver seminal a was Act Tucker The note 10, at 1298. note 11, at 532–33 ( note 11, at 529. 17 , Sisk, , Stephen L. Nelson, supra However, in supra supra 259, 266–67 (2009) (“[D]uring the 1880s, members of the House The “private bill system” was the exclusive means by 15 United States v. Clarke, 33 U.S. 436, 444 (1834) (holding sovereign . 19 EV Additionally, many proclaimed that the private bill system See See, e.g. See, e.g. For instance, in 1887 the government enacted the Tucker 20 16 Under the doctrine as it evolved in the Supreme Court, Injured parties instead would petition members of Congress to 16. Sisk, 17. Act of Mar. 3, 1887, ch. 359, 24 Stat. 505 18. (codified as Sisk, amended at 28 15. 14. 19. Niles, 20. . L. R EX T immunity protected the United States from suit). U.S.C. §§ 1346(a)(2), 1491). whether the federal government could be subject turned to civil on liability its expression of tion. consent to be sued through Act, waiving immunity legisla- for all private citizens’ claims “not sounding in tort” and based upon cially, federal contracts. statutes, regulations, and, espe- the Court made clear that American democracy was different from England’s feudal system in that agents of the government could be sued for wrongs. 2018] ecutive branches to act for the collective exclusively on any private individual. DISCRETIONARY good FUNCTION EXCEPTION rather than focus 279 \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 5 22-MAY-18 12:55 immunity promoting through private contract while also reinforcing its democratic legiti- efficient operation macy as a government of subject to law. the government which victims of governmental negligence could tion. While the seek system was never particularly compensa- satisfactory, it became increasingly ineffective as the creased, leading scope to of an government even dress. greater activity number in- of petitions for re- to have their particular circumstances discussed in the national leg- islature.” wide gap in the government’s consent to be sued. The government remained immune from tort claims filed in a court. pass a private bill that provided direct relief to those “lucky enough pursuant to a written Constitution and lesser its extent agents to are an beholden electorate, to the a executive powers greater of and government that may and or sometimes legislative must be exercised, despite branches the ob- do possess jections of a particular individual who may be aggrieved by such actions.” aned up)). origins, by 1834 the Court acknowledged that the national govern- ment was protected from civil liability by the doctrine of sovereign immunity. Understanding the Discretionary Function Exception to the Federal Tort Claims Act 40268-nys_73-2 Sheet No. 65 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 65 40268-nys_73-2 40268-nys_73-2 Sheet No. 65 Side B 05/23/2018 07:56:14 One of the While there 23 22 1400, at 29–34 (1946). . 79- O The threshold provision, 27 25 . N EP Over the years, it became in- A plaintiff cannot invoke the 21 28 S. R B. The FTCA Id. note 10, at 1300. supra (“In addition to Congress’s perceptions that it was spending an (describing various alternatives, including conferring jurisdiction to jurisdiction conferring including alternatives, various (describing S. 2177, 79th Cong. (1946); at 268–69. 28 U.S.C. § 1346(b)(1) (2012 & Supp. 2016). “Subject to the provision at 268. One common concern was whether the government See id. See Id. Id. See id. See Id. See The statute was and continues to be a “significant and ex- 24 26 After decades of various proposed statutory waivers, the FTCA Between Between 1921 and 1946, over thirty bills were introduced pro- 21. 28. 27. Niles, 22. 23. 24. 25. 26. posing various alternatives to the private bill system. was enacted as Title IV 1946. of the Legislative Reorganization Act of tensive” waiver of sovereign immunity. Committee on Claims estimated that between 1,000 and 2,000 claim bills per ses- sion were referred to their committee for a hearing. This saturation only worsened over time.”). 280was rigged by political favoritism. NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:275 \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 6 22-MAY-18 12:55 creasingly creasingly clear to Congress that the system must be replaced by a suitable substitute. would be exposed to excessive civil liability volved if in the civil decision-making juries process. were in- 28 U.S.C. § 1346(b)(1), outlines the scope of the waiver, establish- ing concurrently both the extent of the government’s potential tort liability and Congress’s grant of jurisdiction to the federal courts district to adjudicate such claims. main points of disagreement was which branch of government agency or within a branch claims. of government would handle the tort was broad consensus on the necessity for a new system, there lacked agreement on what that substitute would look like. inordinate amount of time considering more sensitive private to bills, public complaints political that officials wrought the with political became private favoritism.”). bill system was unjust and of [this title], the district courts, together with the United States District Court for the District of the Canal Zone and the District Court have of exclusive the jurisdiction Virgin of Islands, civil shall action on claims against the United money damages, States, accruing on for and after January 1, 1945, for injury or loss of prop- erty, or personal injury or death caused by the negligent or wrongful act or omis- sion of any employee of the Government while acting within the scope of his office or employment, under circumstances where the United States, if a private person, would be liable to the claimant in accordance with the law of the place where the act or omission occurred.” the United States Employees’ Compensation Commission or the Court of Claims). 40268-nys_73-2 Sheet No. 65 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 65 40268-nys_73-2 40268-nys_73-2 Sheet No. 66 Side A 05/23/2018 07:56:14 In- see also Instead, the statute 33 Congress concluded that 32 According to the Supreme Court 30 By enacting the statute and upsetting 31 , an early case dealing with the waiving This threshold waiver of immunity in 29 Courts may only find the government liable for 34 , 346 U.S. at 43 (“The Act did not create new causes of action 30–31 (“Through such statutes that change the law, organized gov- at 30. Id. Id. See id. See Dalehite As opposed to the “clumsy” private bill system, the FTCA was The FTCA was not intended to provide new bases of liability or 31. 29. 30. Dalehite v. United States, 346 U.S. 15, 25 (1953). 32. 33. 34. 28 U.S.C. § 2674 (2012). Dalehite v. United States 2018] court’s jurisdiction nor can she succeed on the merits of her claim unless she can DISCRETIONARY prove that FUNCTION her EXCEPTION claim is (1) against the United States (2) for money damages (3) for injury or loss sonal of injury property, or or death per- (4) caused by omission negligent or of wrongful act any or employee within of 281 the the scope government of (5) where the United States, while if his a private person, would acting be employment, liable to the (6) claimant in accordance under with the law circumstances of the place where the act omission or occurred. \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 7 22-MAY-18 12:55 negligent acts or omissions that would have been tious under considered applicable state law tor- had the actor been a private party. injured those of claims the equalize to FTCA the intended Congress maintains, “The United States shall be liable . . . in the same man- ner and to the same extent as a private cumstances . . . individual .” under like cir- § 1346(b) is limited by other statutory sections detailed below. intended to “afford instead easy and simple courts access for torts within its scope.” to the federal in the default protection provided by sovereign immunity, expressed Congress its intention to fully and justly compensate those injured by the government’s negligent activity. goals. causes of action against the government. granting the federal courts jurisdiction under the guidance set out in the statute would be the most effective means of fulfilling these ernment expresses the social purposes that motivate its legislation.”); dian Towing Co. v. United States, 350 U.S. 61, 68–69 (1955) (“The broad and just purpose which the statute was designed to effect was to compensate the victims of negligence in the conduct of governmental treatment activities to the . caprice and . legislative burden . of individual and private laws.”). not to leave just statute and its substantive exceptions, the FTCA “is another exam- ple of the progressive relaxation by rigor legislative of the immunity rule.” enactments of the where none existed before.”). 40268-nys_73-2 Sheet No. 66 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 66 40268-nys_73-2 40268-nys_73-2 Sheet No. 66 Side B 05/23/2018 07:56:14 38 However, 35 punitive damages, and prejudg- These limitations include a strict 39 36 Of note, the statute does not provide any an administrative exhaustion requirement; exhaustion administrative an Most importantly, § 2680 includes the discre- 42 37 41 note 10, at 1300. 40 supra United States v. Kwai Fun Wong, 135 S. Ct. 1625, 1637 (2015) (holding (2015) 1637 1625, Ct. S. 135 Wong, Fun Kwai v. States United See Furthermore, the statute was considered only a limited waiver 35. 42. § 2680(a) provides that § 1346(b) does not apply to “any claim based 36. Niles, 37. 28 U.S.C. § 2401(b) (2012). 38. 28 U.S.C. § 2675 (2012). 39. 28 U.S.C. § 2402 (2012). 40. 28 U.S.C. § 2674 (2012). 41. In addition to the DFE, these exceptions include the following: claims because of the thirteen substantive exceptions listed in § 28 U.S.C. 2680 restricting the types of acts or omissions basis of a that tort claim. can form the 282by federal employees to those injured by private parties. NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:275 and the preclusion of jury trials, \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 8 22-MAY-18 12:55 tionary function exception, precluding liability arising from the ex- ercise of due care in the execution of a statute the or performance regulation of and a discretionary function or agency duty or by employee. a federal further detail on should exactly be considered “discretionary.” what kind of governmental function statute of limitations; of statute ment interest. there there are some key differences between the private tort regime and the regime created by the FTCA (and provisions added by amend- ment) intended to limit the Such limitations were deemed necessary in order to protect the sol- government’s exposure to liability. vency of the public and not unduly hamper government officials in the performance of their duties. claims arising out of combat activities by one of the armed forces; claims arising in a foreign country; claims arising from the Tennessee Valley Authority; claims aris- ing from the Panama Canal Company; and claims arising from federal banks. U.S.C. 28 § 2680(a)-(n) (2012). upon an act or omission of an employee of the Government, exercising due care, in the execution of a statute or regulation, whether or not such statute or regula- tion be valid, or based upon the exercise or performance or the failure to exercise or perform a discretionary function or duty on the part of a federal agency or an employee of the Government, whether or not the discretion involved be abused.” that the FTCA’s statute of limitations may be claim against a private defendant because “the FTCA treats the United States more equitably tolled like that of a tort like a commoner than like the Crown”). arising from lost or miscarried letters by postal workers; assessment or claims collection of arising taxes; from claims in the admiralty; claims arising from wars or matters of national defense; claims arising when the government imposes or estab- lishes quarantine; claims arising out from of Treasury certain Department intentional activities or torts; activities claims involving the arising monetary system; 40268-nys_73-2 Sheet No. 66 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 66 40268-nys_73-2 40268-nys_73-2 Sheet No. 67 Side A 05/23/2018 07:56:14 43 1091, 1094 . EV BYU L. R , 2007 However, in more recent , Congress, Courts and Government 46 excepted from Congress’s waiver III. The Discretionary Function Exception to the Fed- 44 687, 715 (1989)). . note 10, at 1300. EV L. R JURISDICTIONALITY JURISPRUDENCE supra Andrew Hyer, Comment, Dalehite v. United States, 346 U.S. 15, 32 (1953) (“One only need read need only (“One (1953) 32 15, U.S. 346 States, United v. Dalehite TAH U See See 45 Unfortunately, in the decades following enactment, many fed- Commentators Commentators have suggested that the substantive exceptions A great number of consequences flow from designating a pro- 45. 43. Niles, 44. 46. Carlyle v. U.S. Dep’t of the Army, 674 F.2d 554, 556 (6th Cir. 1982). , 1989 vision in a cause-of-action-creating statute as “jurisdictional” rather than as claim-processing or merits-related. Claim-processing rules or merits-related determinations may limit the scope of a claim, but jurisdictionality strikes at the very heart of a court’s power and au- thority. The following can occur once a statutory section has been eral courts were too cautious when interpreting the §tions. 2680 excep- As part favoring of jurisdictional characterization, a many federal more courts at all levels interpreted general the exceptions in § 2680 statutory as “clearly limit[ing] the construction jurisdiction trend of the federal courts . . . .” to the government’s waiver of immunity were “based on concerns about the functional impact of tort liability on the government.” functions.”). § 2680 in its entirety to conclude that Congress exercised care to protect the Gov- ernment from claims, however negligently caused, that affected the governmental 2018] DISCRETIONARY FUNCTION EXCEPTIONThe “governmental functions” 283 \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 9 22-MAY-18 12:55 (“One commentator suggests that the purpose of the FTCA was to relieve Congress relieve to was FTCA the of purpose the that suggests commentator (“One of the burdensome private bill procedure, rather than ‘to open the federal govern- ment to new theories of tort liability.’ Thus, Congress included thirteen exceptions to this baseline rule.”) (citing Donald N. Zillman Tort Liability: Reflections on the Discretionary Function Exception to the Federal Tort Claims Act cautiously transfer compensatory courts. power from Congress to the years, the Supreme Court has initiated a new interpretive trend re- straining attachment of the jurisdictional label. This has begun to ameliorate how lower courts interpret the FTCA, §DFE in particular. 2680, and the of immunity were deemed either too important or too elastic to the deterrent effect of tort liability to be included in the FTCA’s waiver of immunity. Additionally, since the FTCA was intended more as an overhaul to the private bill system than a basis for new theories of liability, the thirteen exceptions were added to the statute to more eral Tort Claims Act: A Proposal for a Workable Analysis 40268-nys_73-2 Sheet No. 67 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 67 40268-nys_73-2 40268-nys_73-2 Sheet No. 67 Side B 05/23/2018 07:56:14 . , M W AMES J and, since 47 Claim-process- 49 Without courts en- 50 the Court resolved to Arbaugh v. Y & H Corp. 51 of Am., 511 U.S. 375, 377 (1994) , 568 U.S. at 153. . § 12.30[1] (3d ed. 2005). Sebelius Thus, once an issue obtains the “ju- RACTICE 48 P EDERAL F S ’ focused on whether Title VII’s statutory limitation , 559 U.S. at 161; OORE , 568 U.S. at 153 (stating that courts have lacked “discipline” in ., M even if not raised by either of the parties; parties cannot Arbaugh Reed Elsevier see Sebelius Despite the serious consequences, for a long period of time In 2006, observing the quagmire that resulted from “errone- 48. Kokkonen v. Guardian Life Ins. Co 49. Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154, 161 (2010) (citations omit- 51. Arbaugh v. Y&H Corp., 546 U.S. 500, 511 (2006) (citing 2 47. Sebelius v. Auburn Reg’l Med. Ctr., 568 U.S. 145, 153 (2013). 50. OORE ET AL M (first citing Turner v. Bank of N. Am., 4 U.S. 8, 11 (1799); Gen. then Motors citing Acceptance McNutt Corp., v. 298 U.S. 178, 182–83 (1936)). ted); 284 deemed “jurisdictional”: The court can rule on NYUthe section’s issue sua ANNUALsponte SURVEY OFwaive AMERICANthe issue; a LAWparty at any point in the issue, litigation can raise even the [Vol. after 73:275 entry of judgment or on appeal; \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 10 22-MAY-18 12:55 diction bears the burden of proof for that issue. courts often neglected close analysis in favor of what has been dis- rulings.” jurisdictional “drive-by dubbed paragingly risdictional” label, it will be presumed that the party invoking juris- their use of the term “jurisdiction”) (quoting Henderson v. Shinseki, 562 U.S. 428, 435 (2010)). ing rules or mischaracterized as substantive jurisdictional conditions. elements of a cause of action were “[f]ederal “[f]ederal courts are courts of limited jurisdiction . . . [i]t is presumed to be that a cause of action lies tion, outside and this the limited burden jurisdic- of establishing the party asserting contrary jurisdiction.” rests upon the guide the lower courts on how to identify more carefully issues that were intended to curb the courts’ power. The effort began in deci- sions involving private parties and then extended to suits and stat- utes involving the federal government. In gaging in detailed analysis, a general trend developed that lacked clarity in distinguishing between limitations on the validity of plain- on rule to power courts’ the on limitations and claims statutory tiffs’ those claims. ously conflat[ing]” subject-matter jurisdiction with determinations for merits-related a long period of time, 546 U.S. 500 (2006), the Court Rights considered Act of 1964, which imposes liability upon employers who dis- Title VII of the Civil criminate on the basis of impermissible factors, religion. such as race and excluding from liability employers with less than fifteen employees should be considered a jurisdictional condition or an element of 40268-nys_73-2 Sheet No. 67 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 67 40268-nys_73-2 40268-nys_73-2 Sheet No. 68 Side A 05/23/2018 07:56:14 56 , 568 Sebelius , 562 U.S. at Henderson Thus, the clear-state- 58 , the courts’ statutory or i.e. to reject the jurisdictional 54 , the Court has since applied this In resolving the question, the Court , the Court recognized that “the ab- 52 Arbaugh Arbaugh at 510. . to adjudicate the case.” , 559 U.S. at 158 (characterizing 28 U.S.C.A. § 411(a), the 53 , 568 U.S. at 153 (“Key to our decision, we have repeatedly held , 562 U.S. at 435. power , 546 U.S at 515–16 (internal citation omitted). at 516. Recognizing the untoward consequences of too readily 55 Arbaugh Id. Id. Henderson See Sebelius See Reed Elsevier Indeed, even in 1998 before articulation of the clear- 57 In the decade since If the Legislature clearly states that a threshold limitation on a 52. 53. 54. 56. 57. 55. 58. Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 89 (1998). attaching the jurisdictional label, the ment principle Court “to bring some discipline used to the use of this the term.” clear-state- statement principle in sence of a valid (as opposed to arguable) cause of action does not implicate subject-matter jurisdiction, constitutional The Court has since applied this principle to remove lines and other filing “claim-processing rules” from dead- the jurisdictional col- umn. 2018]the plaintiff’s cause of action. DISCRETIONARY FUNCTION EXCEPTION 285 \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 11 22-MAY-18 12:55 characterization characterization of various provisions ranging across a wide array of statutes. conceived conceived of the “clear-statement principle”: litigants and courts then jurisdictional, as count shall scope statute’s will be duly instructed and will not be left to wrestle with the issue. But when Congress does not rank a statutory limitation on coverage as jurisdictional, courts should treat the restriction as nonjurisdic- tional in character. be applied to statutory provisions detailing the elements of a plain- tiff’s cause of action. ment principle is not limited to claim-processing rules but also must also but rules claim-processing to limited not is principle ment “readily administrable bright line” U.S. at 153. (characterizing the deadline for which healthcare providers may benefi- Medicare to care for them due reimbursement for appeal administrative an file ciaries as nonjurisdictional). that filing deadlines are not ordinarily jurisdictional; them indeed as ‘quintessential we claim-processing rules.’”) have (quoting described 435). Copyright Act’s registration requirement, Shinseki, 562 U.S. 428, as 431 (2010) (characterizing 38 U.S.C. § nonjurisdictional); 7266(a), Henderson the Provi- sion v. of Veterans’ Judicial Review Act notice tional); Gonzalez of v. appeal Thaler, deadline, 565 as U.S. nonjurisdic- 134, § 137 (2012) 2253(c)(3), (characterizing the 28 Antiterrorism U.S.C. and that a Effective habeas petitioner’s certificate Death of appealability Penalty indicate specifically which Act’s is- requirement sue showed a denial of a constitutional right, as nonjurisdictional); 40268-nys_73-2 Sheet No. 68 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 68 40268-nys_73-2 40268-nys_73-2 Sheet No. 68 Side B 05/23/2018 07:56:14 61 . L. KLA , label- O By mis- By 59 , 62 Lexmark and Arbaugh “The Supreme Court has clarified , “courts are required to examine the text the examine to required are “courts , Lexmark, Statutory Standing and the Tyranny of Labels The Court attempted to fix this error by in- Lexmark Lexmark Int’l, Inc. v. Static Control Components, 60 Arbaugh Under the rubric set by , 134 S. Ct. at 1388. 63 (citing Arbaugh v. Y&H Corp., 546 U.S. 500, 516–17 (2006)). Lexmark Id. Reinforcing In 2014, the Court advanced this application of the clear-state- The clear-statement principle must be applied to all provisions 60. Radha A. Pathak, 61. 59. Lexmark Int’l, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377, 62.Cir. (2d 468 462, F.3d 773 L.L.C., Hosp., & Lodging Remington v. Paulsen 63. , 134 S. Ct. 1377 (2014), in which the Court questioned the 62 89, 111 (2009) (“[L]ower courts often elevate the statutory standing question . EV R ment ment principle in Inc. characterization of the “zone-of-interests whether a plaintiff falls into the class authorized by Congress to test,” sue the inquiry under a statute, as one of prudential or statutory standing. into above other questions that should be treated similarly. They elevate the question by making it a threshold inquiry . . . standing question . a Some threshold one; courts they not make it only jurisdictional.”). make the statutory 1387 n.4 (2014) (“We have on occasion referred to this inquiry as ‘statutory stand- ing’ and treated it as effectively jurisdictional . . . . That label over is the an language improvement of ‘prudential standing,’ since it correctly places the the statute. But focus it, on too, is misleading . . . .”). No assumption should exist that Congress intended a certain ment ele- of the plaintiff’s statutory claim to limit the courts’ power to adjudicate the merits of that claim. of a statute creating a cause once of been action, including assumed those to that had noted be in jurisdictional. the wake As of the that Second statutory Circuit standing is not so.” jurisdictional unless Congress says 286 NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:275 \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 12 22-MAY-18 12:55 of the statute in order to determine whether jurisdiction.” it has any effect on structing courts to “apply traditional principles of pretation” statutory inter- in determining plaintiff to whether avail herself of the legislatively-created cause of action. Congress has authorized a jurisdictional level. characterizing characterizing this merits-related determination as prudential a standing, lower question courts routinely of elevated what was sim- ply another element of a plaintiff’s statutory cause of action to the 2014). ing a statutory provision, whether lated, claim-processing as or merits-re- jurisdictional analysis. If Congress requires has not clearly stated careful that the provision is tended and to in- be jurisdictional, then the court has the power to detailed decide statutory the claim on the merits using ordinary rules of statutory interpreta- 40268-nys_73-2 Sheet No. 68 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 68 40268-nys_73-2 40268-nys_73-2 Sheet No. 69 Side A 05/23/2018 07:56:14 66 . Lexmark As a result, the 68 and 69 Arbaugh The twin rules requiring a clear 70 but the Court’s early uneasiness and 67 Prior to enactment of the FTCA, Congress 65 note 11, at 551. , 518 U.S. 187 (1996): “[A] waiver of the Federal supra D.C. Nurses Ass’n v. Brown, 153 F. Supp. 3d 1, 2–3 (D.D.C. 2016) See Id. It follows that the pleading of a claim, including apportion- 64 Justice O’Connor articulated the Court’s traditional approach While the Court’s instruction to apply the clear-statement prin- 64. 65. United States v. Mitchell, 463 U.S. 206, 66.212 (1983). Act of Mar. 3, 1887, ch. 359, 24 Stat. 505 (codified as amended at 28 67. 46 U.S.C. § 30903 (2012) (waiving immunity for admiralty claims arising 68. Sisk, 69. 70. Lane v. Pena, 518 U.S. 187, 192 (1996). Lane v. Pena A. Jurisdictionality Jurisprudence for Waivers of Sovereign Immunity Government’s sovereign immunity pressed in the statutory text . . . . Moreover, a waiver of the Govern- must be ment’s sovereign immunity will be strictly construed, unequivocally in terms of its ex- scope, in favor of the sovereign.” in immunity. The doctrine of sovereign courts immunity from on hearing its claims own against they bars might the otherwise be federal able to adjudicate government under federal-question that jurisdiction. Thus, “[i]t is axiomatic that the United States may not prereq- a is consent of existence the and consent its without sued be uisite for jurisdiction.” ment ment of the burden of proof, is a merits-based condition and not of jurisdictional nature. ciple to both claim-processing and principle the whether to as arise questions some merits-related settled, well is sions statutory provi- should be extended to interpreting statutory waivers of sovereign enacted several statutes providing consent, such as the Tucker Act and Suits in Admiralty Act, 2018]tion. DISCRETIONARY FUNCTION EXCEPTION 287 \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 13 22-MAY-18 12:55 statement of Congress’s consent to be sued and strict construction of the statute providing such consent for waivers of munity sovereign appear to im- preclude application of the clear-statement prin- ciple for jurisdictionality articulated in lack of familiarity with waivers of sovereign immunity caused “inele- gant judicial encounters with waiving legislation.” Court set precedent attaching jurisdictional significance to “every process the regulate or except, constrain, limit, could that provision for adjudicating governmental liability . . . .” fers a private cause of action upon the plaintiff goes to the merits). U.S.C. §§ 1346(a)(2), 1491) (waiving immunity for certain non-tort claims against the federal government enacted in 1887). from use of government-owned ships enacted in 1920). (finding that jurisdiction exists under 28 U.S.C. § 1331, whether the statute con- 40268-nys_73-2 Sheet No. 69 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 69 40268-nys_73-2 40268-nys_73-2 Sheet No. 69 Side B 05/23/2018 07:56:14 and ROCEDURE P 74 Arbaugh RACTICE AND P EDERAL Thus, when interpreting the 73 ., F RIGHT ET AL Instead, application of of application Instead, 77 W Applying the clear-statement principle does For instance, strict construction may still be 71 LAN 72 A note 11, at 565. note 11, at 561. Strict construction extending the jurisdictional label , Irwin v. Dep’t of Veterans Affairs, 498 U.S. 89, 95–96 (1990) 76 Once courts conclusively determine that Congress has HARLES supra supra 75 Orff v. United States, 545 U.S. 596, 601–02 (2005) (interpreting 43 C Dolan v. U.S. Postal Serv., 546 U.S. 481, 491–92 (2006) (holding that ’s clear-statement principle to non-core or non-threshold See, e.g. See See But as courts turn their focus away from the essential scope However, However, in recent years the Court has demonstrated that the 71. 77. 74. Sisk, 75. Richlin Sec. Serv. Co. v. Chertoff, 553 U.S. 571, 76.589 (2008). 14 72. Sisk, 73. and core substance of the statutory waivers, rules of strict construc- tion governing waivers of sovereign immunity may give way to other tools of statutory construction. As Justice Alito stated in a 2007 deci- sion, “The sovereign immunity canon is just that—a canon of con- struction. It is a tool for interpreting the held law, that and it we displaces have the never other traditional struction.” tools of statutory con- clear-statement clear-statement principle has a role in construing waivers of sover- eign immunity too. to all provisions of the statutory waiver runs the risk of contravening of risk the runs waiver statutory the of provisions all to congressional intent. § 3654 (4th ed. 2015). 288 NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:275 \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 14 22-MAY-18 12:55 not undermine or contradict the strict construction of waiving legis- waiving of construction strict the contradict or undermine not lation. Strict construction still persists but should only be invoked when appropriate. invoked to interpret the threshold provision in waiving legislation that broadly delineates the class of claims waived and remedies for are permitted. which immunity is Lexmark provisions would comport with the shared, underlying purpose of all waivers of sovereign immunity: granting authority to courts to consented for the government to be sued and defined the scope of the immunity waiver, they must respect the has enacted. waiver that Congress core elements of a waiver, there may exist allowing a new theories presumption of liability against or forms of remedy. alone). (holding that equitable tolling applies to suits against the government pursuant to waivers of sovereign immunity unless Congress wishes to provide otherwise). U.S.C. § 390uu of the Reclamation Act strictly so the United that States “[c]onsent as a is necessary party given defendant” is to read to join only allow joining the government in an action between other parties, not suing the United States application of strict construction for the FTCA is “unhelpful” because it runs “the risk of defeating the central purpose of ment’s immunity the from suit statute” in sweeping which language.”) (citations “waives omitted). the Govern- 40268-nys_73-2 Sheet No. 69 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 69 40268-nys_73-2 40268-nys_73-2 Sheet No. 70 Side A 05/23/2018 07:56:14 allowing equitable tolling [which The Court’s inclination may be 79 78 in favor of Those elements include: (1) a claim 83 The traditional approach to construing statutory , 510 U.S. at 477. 80 , 546 U.S. at 491–92. B. Jurisdictionality Jurisprudence for the FTCA 81 Rayonier Inc. v. United States, 352 U.S. 315, 320 (1957) (“Congress United States v. Kwai Fun Wong, 135 S. Ct. 1625, 1637 (2015) (“[A]ll FDIC v. Meyer, 510 U.S. 471, 477 (1994) (“Section 1346(b) grants the United States v. Shaw, 309 U.S. 495, 501 (1940) (“A sense of justice has justice of sense (“A (1940) 501 495, U.S. 309 Shaw, v. States United See See See Dolan See See Meyer Thus, the courts do not have the power to even consider the 82 Construction Construction of the FTCA is no exception to this rising trend Since 28 U.S.C. § 1346(b) is the core, threshold provision of 78. 79. 80. 81. 82. 83. bringing bringing discipline to the use of jurisdictionality. In fact, the Court has hinted that it may be even more eager to limit strict tion construc- and jurisdictional labeling to the core provision of the than FTCA other waiving legislation. ments listed in § 1346(b). the FTCA, courts must exclusively establish adjudicatory authority over private tort claims against the government under sion. that provi- merits of the plaintiff’s claim unless it meets the six substantive ele- 2018] adjudicate and ultimately redress private claims against the govern- ment out DISCRETIONARY of FUNCTION a EXCEPTIONsense of justice. 289 \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 15 22-MAY-18 12:55 due to the unique, remedial purpose of the FTCA: costs spreading of government the action or inaction among the indirectly bene- fiting public rather than concentrating the burden on the directly injured party. waivers of sovereign immunity that generously attaches the jurisdic- tional label undermines Congress’s “central purpose” in enacting the FTCA. against the United States (2) for money damages (3) for injury or negligent by caused (4) death or injury personal or property, of loss brought a progressive relaxation by legislative enactments of the rigor of munity the im- rule. As representative governments attempt to ameliorate inequalities as necessities permit, prerogatives of citizen.”). the government yield to the needs of the that is special about the FTCA cuts [sover- of waivers other with compared As labeling]. jurisdictional limiting requires eign] immunity (prominently including the United Tucker States more like Act), a commoner than the like the FTCA Crown.”). treats the was aware that when losses caused by such negligence are charged against the pub- lic treasury they are in effect spread among all those who contribute financially to the support of the Government and the resulting burden on each taxpayer is rela- tively slight.”). federal district courts jurisdiction over a certain category of claims for United which the States has waived its sovereign immunity and (quoting ‘render[ed]’ Richards v. itself United liable.”) States, 369 U.S. 1, 6 (1962)). 40268-nys_73-2 Sheet No. 70 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 70 40268-nys_73-2 40268-nys_73-2 Sheet No. 70 Side B 05/23/2018 07:56:14 , Feres see also Con- 85 ’s clear-state- 91 For example, 86 . 87 Arbaugh , 510 U.S. at 477 (quoting 28 Arbaugh Meyer As the Court explained in 89 Unlike other provisions that have 84 At that point, the courts have the adjudica- 90 note 11, at 556 (quoting And once the plaintiff’s claim is cognizable, is claim plaintiff’s the once And supra , 510 U.S. at 477. 88 § 1346(b) (“[T]he district courts . . . shall have exclusive jurisdiction See Meyer Id. Id. Since the statutory provisions comply with 86. 87. Sisk, 88. 89. Feres v. United States, 340 U.S. 135, 141 90. (1950). 91. 84. 28 U.S.C. § 1346(b)(1) (2012 85.& Supp. 2016). Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154, 161 (2010). United States v. Kwai Fun Wong, 135 S. Ct. 1625, 1628 (2015) (“[T]he FTCA’s ment principle, § 1346(b) the of the FTCA set forth jurisdictional Congress’s statutory threshold waiver of sovereign limits immunity and are to on be in- the scope conditions of terpreted under the rule of strict construction. Any contained theory of liabil- in ity and request elements for in judicial order redress §1346(b). to must be strictly “cognizable” meet and all “actionable” six under “[j]urisdiction of the defendant now exists where the defendant was defendant the where exists now defendant the of “[j]urisdiction immune from suit before . . . .” of civil actions on claims against the United States, for money damages.”); jurisdictional grant appears . . . in . . . Title 28, § 1346(b)(1).”). U.S.C. § 1346(b))). 290or wrongful act or omission of NYU any employee (5) while ANNUAL acting within the of scope of his employment, (6) the under cir- SURVEY Government OF cumstances AMERICANwhere the United States, LAWif a private person, would be liable to the claimant in accordance with the law of the place where [Vol. 73:275 the act or omission occurred. \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 16 22-MAY-18 12:55 tory authority to allow or deny a claim on its §by prescribed test merits based substan- the as such sections, other and 1346(b) on the tive exceptions listed in § 2680, statute of limitations in §or administrative exhaustion 2401(b), requirement in § 2675. whether a government employee was “acting within his . the . . scope employment” and of whether the “circumstances” are as such that a “private person would be liable” under the law applicable are jurisdictional state questions that must be satisfied before courts have authority to reach the merits of the claim. mistakenly mistakenly been victims of “drive-by jurisdictional rulings,” “[I]t remains for courts, in exercise of their jurisdiction, the purpose, this For law. in recognizable is to claim any whether mine deter- Act goes on to prescribe the test for allowable claims . . . with tain cer- exceptions . . . .” gress has clearly stated that the FTCA’s core provision was intended as the jurisdictional prerequisite to its waiver of immunity, thus sat- isfying the clear-statement principle of 40268-nys_73-2 Sheet No. 70 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 70 40268-nys_73-2 40268-nys_73-2 Sheet No. 71 Side A 05/23/2018 07:56:14 Finally, 95 The rule of strict of rule The 93 Because filing dead- 92 These analytical tools 96 Further, she noted that the 94 at 1632 (citations omitted). . , the Court held that § 2680(b), which , Justice Kagan, writing for the majority, , Justice Kagan utilized a few different tools Dolan 135 S. Ct , 135 S. Ct. at 1631 (citing Irwin v. Dep’t of Veterans Af- Kwai Fun Wong at 1633. at 1632–33. , in Kwai Fun Wong Kwai Fun Wong Kwai Fun Wong, Id. Id. Id. By contrast, the Court has held that the rule of strict construc- In Indeed, the Court in an earlier decision declined to apply the 92. 93. 94. 95. 96. sumption of equitable tolling” as those in suits against private par- ties. Since the Government could not prove that Congress intended the time bar located in 28 U.S.C. § 2401(b) to be jurisdictional, the Government did not rebut the presumption. tion ought not reflexively to be applied to sections of the FTCA that FTCA the of sections to applied be to reflexively not ought tion do not constitute jurisdictional conditions. These other conditions appear outside of § 1346(b), and a key example is the Court’s treat- ment of the statute of limitations for the filing of FTCA claims that is set forth in § 2401(b). Arbaugh Using similar principles that undergird described time bars in suits against the government pursuant to pre- “rebuttable same the to subject as immunity sovereign of a waiver 2018] DISCRETIONARY FUNCTION EXCEPTION 291 \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 17 22-MAY-18 12:55 excludes “[a]ny claim arising out of the loss, miscarriage, or negli- gent transmission of letters or postal matter” from giving rise to used for interpreting §claim-processing rules 2401(b) but can also be are applied for interpreting not the unique merits-related sections of the statute, such to as the substantive excep- the FTCA’s tions in § 2680. rule of strict construction when interpreting § 2680(b) of the FTCA gov- the of scope the from conduct government certain excepts that ernment’s waiver. In lines are “‘quintessential claim-processing promote rules,’ the which orderly ‘seek process to of court of litigation’ authority to hear a but case, . . . do the Government must clear not a jurisdictional. deprive are they that establish” to bar high a “statutory context” separating the filing deadline from the jurisdic- tional grant in § 1346(b) supported the Court’s reading. fairs, 498 U.S. 89, 95–96 (1990)). construction did not apply and the filing conditions were not juris- dictional—they were claim-processing rules dealing with the merits. the lack of a clear statement from Congress in the statute’s legisla- tive history solidified the Court’s decision. risdictional statutes of limitations. of statutory construction to lighted the language of § support 2401(b) her and its similarity to other nonju- conclusion. She high- 40268-nys_73-2 Sheet No. 71 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 71 40268-nys_73-2 40268-nys_73-2 Sheet No. 71 Side B 05/23/2018 07:56:14 . 99 Instead, the §the Instead, 2680 , “‘unduly, generous 101 Upon applying ordinary Dolan 97 pursuant to their jurisdiction While strict construction of § 1346(b) pre- 102 546 U.S. at 492 (quoting Kosak v. United States, 465 U.S. 848, 553 According to the decision in decision the to According , 546 U.S. at 492. at 485–86, 491. at 492 (quoting Kosak v. United States, 465 U.S. 848, 853 n.9 (1984); 100 at 485. If the Court were to apply strict construction as the govern- the as construction strict apply to were Court the If Id. Id. Dolan, Dolan Id. 98 Like with the § 2680(b) “mail” exception, Congress did not in- In support of its ruling, the Court emphasized that the § 2680 97. Dolan v. U.S. Postal Serv., 546 U.S. 481, 485 (2006) (quoting 28 U.S.C. 98. 99. 100. 101. 102. no less and no more.” § 2680(b)). As “exceptions” to the “jurisdictional grant” and waiver of sovereign exceptions the interpreting it, of components than rather immunity does not implicate the rule of sovereign. strict construction in favor of the 292 liability, should not be strictly construed. NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:275 \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 18 22-MAY-18 12:55 interpretations of the [FTCA] exceptions run the risk of defeating the central purpose of the statute,’ . . . which .’”. . . language sweeping in immunity ment’s ‘waives the Govern- vents expansion of the government’s liability beyond congressional intent, strict construction of the would scope undermine the of remedial purpose the of the statute. § 2680 exceptions tend the § 2680(a) “discretionary function” exception to operate as a jurisdictional prerequisite limiting the power of the courts to con- sider the merits of a plaintiff’s FTCA claim. Rather, once courts rec- ognize that a plaintiff’s claim is cognizable under the six elements listed in § 1346(b), then they have the authority to proceed to merits the and determine if the claim justifies granting relief under all sections of the FTCA, including the DFE. Simply put, courts must determine whether the DFE bars relief exceptions “qualif[ying] [the FTCA’s] waiver of nity sovereign for certain category of immu- claims” were located in a separate statu- tory section from the jurisdictional grant contained in § 1346(b). ment argued, then it likely would have interpreted “negligent trans- mission of letters or negligent placement of mail postal by a postal matter” worker that caused bodily literally injury and barred to the plaintiff’s claim. encompass the exceptions should be construed so as stances to which are within identify the words and “‘thosereason of the exception’— circum- tools tools of § statutory 2680(b) did not exclude relief for the plaintiff’s tort claim arising interpretation, from the the Postal Court Service’s porch. negligent concluded placement that of mail on her and then quoting United States v. Yellow Cab Co., 340 U.S. 543, 547 (1951)). n.9 (1984); and then quoting Dalehite v. United States, 346 U.S. 15, 31 (1953)). 40268-nys_73-2 Sheet No. 71 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 71 40268-nys_73-2 40268-nys_73-2 Sheet No. 72 Side A 05/23/2018 07:56:14 How- 107 clear-state- Further, the DFE Arbaugh 105 The DFE is not juris- 103 (quoting United States v. Cook v. States United (quoting in order to attach jurisdic- attach to order in Id. 104 Parrott v. United States, 536 F.3d 629, 634 (7th Cir. 2008). United States v. Kwai Fun Wong, 135 S. Ct. 1625, 1633 (2015) , Arbaugh v. Y&H Corp., 546 U.S. 500, 514–15 (2006) (holding , Abreu v. United States, 468 F.3d 20, 25 (1st Cir. 2006) (reason- 106 See, e.g., See, e.g. See, e.g., See, e.g. Nevertheless, some lower courts have interpreted § 2680 differ- Nowhere Nowhere in the FTCA has Congress clearly stated that the DFE 103. 105. 106. 104. Sebelius v. Auburn Reg’l Med. Ctr., 568 U.S. 145, 153 (2013). 107. ently. The section reads, “The provisions of this chapter tion 1346(b) of this and title shall not apply Sec- to” the thirteen substantive exceptions. These courts have interpreted the clear statement from text Congress that the as section is showing jurisdictional be- a cause it refers back to the jurisdictional grant in § 1346(b). “‘[W]hat sovereign immunity means is that pends on the relief statute; the question against is not the competence the of the court to United render a States de- binding judgment, but the propriety of interpreting a given statute to allow partic- ular relief.’ That principle resolves this jurisdictional exceptions enumerated in § debate, too. 2680 . . . limit the breadth of the Government’s waiver The statutory of sovereign immunity, but they do not accomplish this task by courts.” federal the from jurisdiction ject-matter withdrawing sub- 2018] The DFE is not a limit on their jurisdiction. DISCRETIONARY FUNCTION EXCEPTION 293 \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 19 22-MAY-18 12:55 that Congress did not clearly instruct courts to treat Title VII’s 15-employee thresh- 15-employee VII’s Title treat to courts instruct clearly not did Congress that old as jurisdictional). Cty., 167 F.3d 381, 389 (7th Cir. 1999)). dictional dictional and is not subject to the rule extends to of jurisdictional sections of strict the statute construction but rather that the ordi- nary tools of statutory interpretation. is intended to be jurisdictional, and the legislative history provides Congress Granted statute. the into term that reading for support no words” magic “incant to need not does and all of the other substantive exceptions are separate located in § from 2680, § the 1346(b). FTCA’s jurisdiction-granting provision in tionality to a statutory provision, despite the (emphasizing the significance of the statute’s structure for distinguishing between interpretations of the FTCA’s threshold provision and its statute of limitations). ing that the language of § 2680 provides that if the DFE applied then “the jurisdic- tional grant of section 1346(b) [would] not”). ever, such interpretations jurisdictional contravene interpretation based on the statutory section cross-refer- Court’s rejection of ment principle. Nevertheless, Congress must provide at least clear instruction to the courts. None exists for the DFE. Nowhere in the entire section, much less subsection, or words legislative “jurisdiction” or history “jurisdictional” appear. do the 40268-nys_73-2 Sheet No. 72 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 72 40268-nys_73-2 40268-nys_73-2 Sheet No. 72 Side B 05/23/2018 07:56:14 110 it is How- 111 113 Dalehite v. see also The provision main- Section 2680’s refer- 109 108 IV. BURDEN OF PROOF note 4, at 1541. note 10, at 1302–03. supra OVERVIEW OF THE DFE AND THE at 1301 (“Unlike the other exceptions, the discretionary function supra 112 Gonzalez v. Thaler, 565 U.S. 134, 145 (2012) (“Congress set off the See id. See Congress provided little explicit guidance on the purpose or The DFE has been described as “[t]he most gaping and fre- 112. 113. Berkovitz v. United States, 486 U.S. 531, 536 (1988); 110. 28 U.S.C. § 2680(a) (2012). 111. Niles, 108. 109. Levine, restriction is stated in broad terms, has resulted in a substantial limitation on the liability of the United States in a wide range of circumstances, and has fostered a substantial jurisprudence.”). United States, 346 U.S. 15, 25–27, 30 Viacao (1953); Aerea United Rio States Grandense (Varig v. Airlines), S.A. 467 Empresa U.S. de States 797, v. Gaubert, 813 499 (1984); U.S. 315 United (1991). quently litigated of the FTCA’s exceptions.” application of the DFE. As mented with various formulations, hoping to promote ease of appli- a result, the Supreme Court cation experi- and predictability while discretionary function also exception was designed excluding to shield.” claims that “the requirements in distinct paragraphs and, rather than cluded mirroring the their jurisdictional terms terms, in one ex- from the other.”). While the language in the first half of the provision is fairly simple and clear so that its application has not led to much dispute, 294 encing under the clear-statement principle. NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:275 \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 20 22-MAY-18 12:55 ral back to the jurisdictional threshold provision of the FTCA does not stand in for a clear statement or instruction from Congress that courts should treat the DFE as a authority. limitation As on a result, their like adjudicatory other statutory waivers of munity, strict construction sovereign should be limited to the threshold provi- im- sion granting jurisdiction to the federal courts, i.e., § 1346(b), and ordinary tools of statutory interpretation should be used to read all other provisions of the FTCA. functions” from reputation. which the provision garners its name and tains immunity for categories of governmental acts: (1) the exercise of negligence due care in the claims execution based of a statute or regulation on and (2) the performance of two a discretionary function or duty separate by a federal agency or employee. the broad language in the second half referring to “discretionary ever, when defining the scope of the exception’s application, the 40268-nys_73-2 Sheet No. 72 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 72 40268-nys_73-2 40268-nys_73-2 Sheet No. 73 Side A 05/23/2018 07:56:14 the , the 117 Berkovitz v. Gaubert 734, 737 n.20 . 207, 225 (1956) EV . B.J. 116 T . L. R TAN . & S S Torts-Federal Tort Claims Act— EV , 6 . L. R 1279, 1280 (1954); then citing Com- . ASH EV W . L. R , 31 The conduct must be the product of The Federal Tort Claims Act: A Proposed Construction Proposed A Act: Claims Tort Federal The WILLIAM B. WRIGHT, THE FEDERAL TORT ARV Furthermore, the first scholars examin- 118 H , 499 U.S. 315 (1991), in which the Court 115 note 5, at 124–25 (collecting the works of early com- 67 , 467 U.S. 797, 813 (1984), and supra , the Court detailed the two-step test: The DFE , 467 U.S. at 813. , 346 U.S. at 42 (reversing the lower court’s finding of liability , 499 U.S. at 315. Cornelius J. Peck, J. Cornelius , 486 U.S. 531 (1988). Rejecting the even earlier stan- 90 (1957); then citing Recent Case, the Sixth and Seventh Circuits were the only two courts Bosworth, Berkovitz 114 Varig Airlines Gaubert See See Dalehite Varig Airlines see also see In Federal Tort Liability for Experimental Liability However, a division developed following the Court’s decision 119 114. 115. Carlyle v. U.S. Dep’t of the Army, 674 F.2d 554 (6th Cir. 1982); Stewart v. 116. 117. 118. 119. Berkovitz v. United States, 486 U.S. 531, 536–37 (1988). United States v. Gaubert Accident Held to Be Within Discretionary Function Exception Without Proof Where Govern- CLAIMS ACT dard that focused on the status of the government actor, in altered the test for when the exception applies. Before United States United States, 199 F.2d 517, 519 (7th Cir. 1952). will not apply (1) when a federal statute, regulation, or policy spe- both sides. Thus, whether the plaintiff burden of or proof for the government DFE in bears FTCA cases the carries some very real practical stakes. Prior to the Court’s most recent case dealing with the DFE, 2018] Supreme Court has never addressed whether the DFE is an affirma- tive defense, whose burdens of pleading and proof DISCRETIONARY is to be assigned FUNCTION EXCEPTIONto the government, or an element of the cause of action, to be as- signed to the plaintiff. Assigning the burdens of pleading and proof bearing party The litigation: civil in implications profound have can the burden of 295 pleading must introduce the issue into the case; the party bearing the burden of proof must be the first to provide core evidence on that issue; and the party bearing the burden of proof must risk losing the case if the fact-finder is equally persuaded by \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 21 22-MAY-18 12:55 ing the DFE treated it as an affirmative defense. of appeal to consider the burden question, each assigning the bur- den to the government. Supreme Court had established the modern test for DFE applying the in (deciding that the exceptions present a question of defense, not jurisdiction). “judgment or choice . . . icy.” based on considerations of public pol- mentators interpreting the DFE as an affirmative defense tional rather than prerequisite) a (first jurisdic- citing ment, Court concentrated on the “nature of the conduct” for governing whether the DFE applies. (1954)); of the Discretionary Function Exception ments Claims Military Secrecy, for decisions “made at a planning rather than operational level”). 40268-nys_73-2 Sheet No. 73 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 73 40268-nys_73-2 40268-nys_73-2 Sheet No. 73 Side B 05/23/2018 07:56:14 124 s alter- Second, focusing The two- 122 121 120 Gaubert’ ’s application of the DFE Gaubert note 10, at 1353 (“[T]he Supreme Court’s current supra note 45, at 1103. formulation diverges from the critical inquiries in While never expressly overruling prior doctrine, test has been described as providing a “concrete , the Court revised its test for applying the DFE in , Niles, supra 123 at 325. Gaubert by introducing the novel “presumption” and opportunity Id. See, e.g. Id. Gaubert drastically altered the then-existing substantive scope of the Berkovitz Scholars have argued that The In 122. United States v. Gaubert, 499 U.S. 315, 324 (1991). 123. 124. 120. 121. Hyer, A. Gaubert Contradicts Legislative History and Congressional Intent interpretation of the exception expands the provision’s their intended limitations scope.”). well beyond The FTCA symbolized Congress’s acknowledgement that sovereign immunity does not justify failing to compensate tort victims simply 296 cifically prescribes a course of action for the employee or agency to NYU follow ANNUALand, if no such SURVEY prescription exists, then (2) OFwhen the judg- ment AMERICAN is of LAW the kind that the DFE was kind of not decision designed that did to not [Vol. shield, 73:275 involve policy the judgment. \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 22 22-MAY-18 12:55 pothetical, rather than subjective and actual, factors. ations to the test balance for Congress established between the the FTCA’s waiver DFE’s of sover- application eign upend immunity the and careful functions. the DFE’s protection of core government Gaubert DFE. Berkovitz for “policy-susceptibility analysis,” shifting focus to objective and hy- on the nature of the action and the considerations of the actor. contravenes Congress’s purpose in enacting the FTCA and DFE. prong framework” and “workable test” for applying the DFE, when analyzing whether grounded in policy, courts the should not focus on the actor’s “subjec- actor’s tive intent” judgment but rather “whether [the actions] are susceptible to pol- or choice icy was analysis.” regulation, or even agency guideline authorizes the government ac- tor in question to exercise discretion, then its very existence creates a “strong presumption” grounded in policy that and, thus, the protected by the actor’s DFE. discretionary act is two key ways. First, it held that if it can be shown that any statute, 40268-nys_73-2 Sheet No. 73 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 73 40268-nys_73-2 40268-nys_73-2 Sheet No. 74 Side A 05/23/2018 07:56:14 126 128 77th The Legis- 125 127 The Committee 129 ’s ‘presumption’ of the Gaubert at 508. is not faithful to the legislative history Id. note 10, at 1334 (“ note 45, at 1095 (“[I]n enacting the exception, Con- Gaubert supra supra , Niles, , Gray v. Bell, 712 F.2d 490, 508 (D.C. Cir. 1983). “[W]e first note , Hyer, Indian Towing Co. v. United States, 350 U.S. 61, 68 (1955) (“The See, e.g. Bills to Provide for the Adjustment of Certain Tort Claims Against the United See See, e.g. See, e.g. magnified the DFE’s scope beyond congressional intent. broadens the application of the DFE beyond the limited For instance, testifying to the House Judiciary Committee in Unquestionably, 128. 129. 125. 126. 127. that the language of the discretionary function clause discloses about virtually the nothing scope of its protection. Literal adherence to function’ the phrase leads ‘discretionary to blind alleys. human experience involve some element of discretion, any interpretation focusing Because virtually all decisions on the plain import in of the statutory language would swallow the the general waiver of realm of sovereign immunity in the FTCA.” States: Hearing on H.R. 5373 and H.R. 6463 Before the H. Comm. on the Judiciary, Cong. 33 (1942) (statement of Francis M. Shea, Assistant Att’y Gen.). gress did not define discretionary function and commentators suggest gress that provided little Con- concrete guidance as to its intended scope.”). broad and just purpose which the statute was designed to effect was to compensate the victims of negligence in the conduct of governmental activities . . . .”). policy-grounded nature of all governmental discretionary acts serves, and indeed seems implicitly grounded in, a concept of absolute sovereign immunity which . . . was expressly rejected, at least as applied to negligent torts, by the FTCA.”). Gaubert support of an FTCA predecessor, Assistant Attorney General Fran- cis Shea explained that the statute was not intended to allow propriety “the of a through the medium discretionary of a damage suit in administrative tort.” act” to be “tested 2018] because their injurers happened to be federal employees. DISCRETIONARY FUNCTION EXCEPTIONGaubert roles intended by Congress to FTCA the status 297 quo. point of re-instating the pre- \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 23 22-MAY-18 12:55 ized activity, such as flood-control or irrigation project” or “a claim against a regulatory agency, such as the Federal Trade Commission or the Securities and Exchange Commission,” where “the only adopted language in its House Report to Congress echoing that of the Assistant Attorney General, emphasizing “this is a highly impor- tant exception, intended to preclude” suits derived from “author- Court’s Court’s expansion of the scope and applicability of the DFE under- cuts Congress’s broad, remedial purpose for enacting the FTCA. of the DFE. This legislative history is important given the statute’s failure to define what it means by “discretionary function.” lative history demonstrates that Congress intended the provision to mitigate the FTCA’s effect on certain essential governmental func- tions not amenable to tort liability, but not to exclude from liability every government act that involves some element of discretion. 40268-nys_73-2 Sheet No. 74 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 74 40268-nys_73-2 40268-nys_73-2 Sheet No. 74 Side B 05/23/2018 07:56:14 , 136 134 H.R. The Court’s Susceptible to Faulty 135 Bills to Provide for the Adjust- 79-1196, at 7 (1946); then . O , the Court did not con- . N from agents acting within EP (“Without a discretionary function 132 S. R Dalehite See id. 77th Cong. 33 (1942) (statement of Fran- observed that, since the legislative 130 while preserving governmental liabil- governmental preserving while and the Resurrection of Federal Sovereign Immunity 131 , one of the earliest Supreme Court cases 76-2428, at 3 (1940). . note 4, at 1541 n.21. “The legislative history regarding 447, 480 (1997). First, preventing “judicial second-guess- . Varig Airlines Dalehite Rep. No supra EV note 10, at 1312 (“These are the kinds of decisions that should , 346 U.S. at 28. H.R. L. R As demonstrated in see , Bruce A. Peterson & Mark E. Van Der Weide, Levine, supra ; AME 133 E.g. See Dalehite Id. Id. D United States v. Gaubert 77-2245, at 10 (1942); then citing . O The Court in OTRE 135. United States v. S.A. Empresa de Viacao Aerea Rio Grandense 136. (Varig 130. Dalehite v. United States, 346 U.S. 15, 29 n.21 (1953) (first citing 134. 131. 132. 133. . N N EP R Id. Airlines), 467 U.S. 797, 814 (1984). Analysis: what types of claims were to be protected is examples that sparse. lie at the It extremes. For example, deals it makes clear largely that ordinary negli- with isolated gence in operating a motor vehicle would not be protected discretionary conduct, would.” powers freezing and blacklisting its of use Department’s Treasury the while citing H.R. Rep. No. 79-1287, at 5–6 (1945); then citing ment of Certain Tort Claims Against the United States: Hearing on H.R. 6463 5373 Before the and H. Comm. H.R. on the Judiciary, cis M. Shea, Assistant Att’y Gen.)). ing” preserves the separation of powers. exception to governmental tort liability, the judiciary would be able, through tort plaintiffs, to obtain substantive review powers ors.”); Niles, over most governmental endeav- Thus, the Court in history consistently referred to acts of regulatory agencies as exam- ples of what Congress intended the DFE to cover, clearly “Congress wished to prevent judicial ‘second-guessing’ of legislative ministrative and decisions ad- grounded in social, economic, and political policy through the medium of an action in tort.” 298 ground for suit is the NYU contention that individual same ANNUAL would be conduct tortious.” by SURVEY a private OF AMERICAN LAW [Vol. 73:275 \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 24 22-MAY-18 12:55 72 ity for “ordinary common law torts” addressing addressing the DFE, interpreted this history as Congress including the provision to reserve consent to be sued function,” or nature mental for “acts of a govern- sider the sparse legislative history as providing detailed instruction on how to apply the DFE but treme rather as examples highlighting of obvious, ex- what should and should not be covered. interpretation emphasized three important serves: (1) formally maintaining the separation of powers, (2) func- roles that the tionally precluding DFE the impossible task making of into fitting the policy judicial decision formula for determining negligence, their scope of employment, such as “negligence in the operation of vehicles.” 40268-nys_73-2 Sheet No. 74 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 74 40268-nys_73-2 40268-nys_73-2 Sheet No. 75 Side A 05/23/2018 07:56:14 opin- the deci- ] interpreta- Gaubert at 1310. 138 Id. Gaubert note 45, at 1091 (“Al- Gaubert, does not decide is the supra Gaubert note 20, at 279 (“The Court’s note 10, at 1313 (“Courts are ill suited, how- note 136, at 448 (“This phrase [‘susceptible to as having “swallowed, digested, and excreted the supra supra supra Gaubert Niles, note 10, at 1309 (stating that the exception is a trade-off as an expansion of sovereign immunity beyond prior Su- Nelson, See , 467 U.S. at 814 (holding that the DFE “protect[s] the Gov- presumption has remained the law for seventeen years, it has supra Gaubert see also Niles, Rosebush v. United States, 119 F.3d 438, 444 (6th Cir. 1997) (Merrit, 137 Gaubert See See Varig Airlines note 10, at 1331–32 (“[T]he substantive impact of the [ Despite the justifiable criticisms aimed at 138. 137. tion also serves to drastically limit the exposure of the United States to liability.”); Peterson & Van Der Weide, been consistently decried by commentators as applying the discretionary function exception too broadly and in effect swallowing the purpose of the FTCA.”); Niles, supra policy analysis’] is now raised by the government’s lawyers in countless negligence lawsuits against the United States, and it has greatly restricted the federal govern- ment’s tort liability for all but the most mundane transactions.”). preme Court interpretations of the DFE . . . .”); Hyer, though the ion is a specific target of much of this negative commentary, because most public law scholars view tions.”) (quoting United States v. Muniz, 374 U.S. 150, 163 (1963)). First, the DFE prevents government agencies and actors based not upon from competing policy choices but rather making avoiding liability for the gov- discretionary decisions ernment. that limits compensation to those injured but gained from efficient preserves and prompt execution”). Second, “societal the DFE reduces the benefits time to be and resources the government must spend in FTCA litigation. J., dissenting) (describing liability-creating sections of the Federal Tort Claims Act”); Allen v. United States, 816 F.2d 1417, 1424 (10th Cir. 1987) (McKay, ‘the J., king concurring) can (“[T]he do rule no that wrong’ still prevails trivial matters.”); at the federal level in all but the most be made, whenever possible, by government officials directly accountable constituencies affected. If decisions of to this kind could be routinely challenged the in a court of law . . . the democratic through litigation.”). Second, federal process courts are ineffective at judging the would reasona- be replaced . . . bleness by of policy-based decisions that government incorporate the concerns of competing con- stituencies and the use of scarce resources and impact large non-fact specific ways. swaths of people in ever (as the traditional justiciability doctrines strate), of to standing address disputes and involving ripeness broad questions demon- of policy with prospective a impact potentially on large numbers of people.”). time Third, and resources the the government DFE must spend reduces in FTCA the litigation. ernment from liability that would seriously handicap efficient government opera- 2018]and (3) preventing the handicapping of important governmental functions. DISCRETIONARY FUNCTION EXCEPTION 299 \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 25 22-MAY-18 12:55 sion remains the governing rule on how to determine whether the DFE defeats liability. However, what assignment assignment of the burden of proof to show the applicability of DFE. the 40268-nys_73-2 Sheet No. 75 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 75 40268-nys_73-2 40268-nys_73-2 Sheet No. 75 Side B 05/23/2018 07:56:14 see The , of Just a 141 as support Gaubert test for when the Gaubert , 973 F.2d 696 (9th ’s “presumption” and note 5. Berkovitz Ugo Colella & Adam Bain, 143 Some lower courts correctly Gaubert supra 140 See generally Bosworth, note 20, at 279. Prescott v. United States 2859 (1999). Another comment focuses on the bur- . formulation for the applicability of the EV supra See generally L. R B. Gaubert and the Burden of Proof Gaubert Nelson, ORDHAM The First Circuit has also expressly adopted the reason- Montijo-Reyes v. United States, 436 F.3d 19, 24 n.7 (1st Cir. 2006) F 142 See See, e.g., , 67 few have commented on the burden of proof question that never changed the procedural status quo. Division over .” 139 There is little disagreement that The Ninth Circuit in While many have observed the problems in the lower courts 141. Prescott v. United States, 973 F.2d 696, 142.702 n.4 (9th Cir. 1992). Kiehn v. United States, 984 F.2d 1100, 1105 n.7 (10th 143. Cir. 1993); 139. 140. One expansive article recommends a uniform burden allocation scheme Autery v. United States, 992 F.2d 1523, 1526 n.6 (11th Cir. 1993). (“‘[T]he law presumes that the judgments,’ exercise so Plaintiffs ‘bear of the burden . official . . of discretion demonstrating that the implicates [Corps’] policy Burden of Proving Jurisdiction Under the Federal Tort Claims Act: A Uniform Approach to Allocation 300 NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:275 \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 26 22-MAY-18 12:55 arose following the Court’s decision. Cir. 1992) agreed with the burden allocation scheme previously en- dorsed by the Sixth and Seventh Circuits, concluding, “ course, did not deal with the burden of proof question.” noted that since the Supreme Court never indicated otherwise, the burden is most appropriately placed on the government as firmative an defense. af- Others mistakenly relied on for assigning the burden to the plaintiff, raising obstacles in a plain- tiff’s quest for trial and discouraging those at the margin from ever bringing claims in the first instance. den of proof for the DFE and suggests amending FRCP 8(c) to include the DFE as an affirmative defense. ing of the Tenth and Eleventh Circuits. assigning the burden of proof for all provisions of the cluding a FTCA section devoted to to the the DFE. plaintiff, in- few years later, though, the Tenth and Eleventh Circuits declined to declined Circuits Eleventh and Tenth the though, later, years few adopt the Ninth Circuit’s analysis, reasoning that assigning the bur- den of proof to Gaubert the government “may be suspect in light of and proving the DFE has caused a circuit split over the DFE’s bur- den of proof. posed by the “policy-susceptibility “policy-susceptibility analysis” modify the DFE applies, limiting the types of government activities that could give rise to tort liability. However, some the decision have as procedurally impacting who further proves the applicability interpreted of the exception and how that is done, while others have noted that Gaubert whether the Court intended to alter the procedure for pleading DFE, 40268-nys_73-2 Sheet No. 75 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 75 40268-nys_73-2 40268-nys_73-2 Sheet No. 76 Side A 05/23/2018 07:56:14 see, 145 144 147 1, 15 (1958); . EV . L. R A Legislative Control over Judicial U. P , 107 And finally, some, such as the 146 Davis v. Fed. Emergency Mgmt. Agency, 556 ex rel. Estate of Sharp v. United States, 401 F.3d 440, 443 presumption on the question of which party bears to support the type of “jurisdictional drive- ex rel. Gaubert Abunabba v. United States, 676 F.3d 329, 333 n.2 (3d Cir. Watching the Hen House: Judicial Rulemaking and Judicial Review, Gaubert The hazy substance-procedure dichotomy extends 148 , 146 F.3d at 823. ex rel. 72, 97 (2012) (“[T]he task of differentiating the substantive from . , Welch v. United States, 409 F.3d 646, 649 (4th Cir. 2005); Aragon v. St. Tammany Par. EV , some circuit courts have failed to even consider the E.g. Aragon See . L. R The disagreement over the burden of proof for the DFE is par- Bearing Bearing in mind the Tenth and Eleventh Circuits’ skepticism Other circuits have noted the split but declined to decide one EB 147. S.R.P. 148. A. Leo Levin & Anthony G. Amsterdam, 144. 145. 146. Prescott N , Carrie Leonetti, 91 tially derived from the “well-nigh impossible” task for scholars and jurists alike in differentiating between and pinpointing the relation between the two in various contexts of substance and procedure civil litigation. of function exception . . . . [W]e need not settle this issue here.”). 2012). conduct was not at least susceptible to policy related judgments.’”) (quoting Wood v. United States, 290 F.3d 29, 37 (1st Cir. 2002)). United States, 146 F.3d 819, 823 (10th Cir. 1998). the burden of proving the applicability (or inapplicability) of the discretionary- Arbaugh. way or the other on the issue. 2018] DISCRETIONARY FUNCTION EXCEPTIONBy strictly construing the DFE as a “jurisdictional prerequisite,” these courts did 301 not even attempt to deliberate the most appropri- ate and optimal assignment of the burden of proof. simply relied Instead, on they by ruling” for the DFE that the Court has been trying to fix since \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 27 22-MAY-18 12:55 the procedural has been an elusive befuddled one by the for task of differentiating many the substantive courts.”). from the procedural “Courts . . . have . Substantive been law is said to create and define legal rights with respect to persons and e.g. Ninth Circuit’s analysis and plaintiff simply as part of assigned her invocation of the subject matter burden jurisdiction. to the Rulemaking: A Problem in Constitutional Revision F.3d 307, 315 n.3 (5th Cir. 2009) (“While the plaintiff bears the burden of showing an unequivocal waiver of sovereign immunity, it is less clear whether the plaintiff or the government bears the burden function of exception to a proof waiver of sovereign immunity to applies. Our sister show courts of whether a appeals are split.”); discretionary Sharp n.1 (6th Cir. 2005) (“We note that impact of this so-called there appears to be some debate as to the Third Circuit, “[A]bsent have an explicit statement from agreed the Supreme Court that the plaintiff with bears the ultimate burden, we continue to believe that the the burden of proving the applicability of the Ninth discretionary function ex- Circuit, ception stating, is most appropriately placed on the Government.” 40268-nys_73-2 Sheet No. 76 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 76 40268-nys_73-2 40268-nys_73-2 Sheet No. 76 Side B 05/23/2018 07:56:14 . W L. 151 , 43 N IAMI pre- This AME , 76 U. M D 150 As one 152 , 56 OTRE Gaubert N , 60 1015, 1187–88 (1982). . EV Obstacle to State Tort Reform , 310 U.S. 650 (1940)). . L. R Erie A An U. P cert. denied 130 State Sovereignty and the Two Faces of Federalism: A Presumptions, Inferences and Burden of Proof in Federal note 5, at 104 (“[C]ourts and scholars alike have 301. “In a civil case, unless a federal statute or these . supra VID presumption, presumption, Justice White, writing for the majority, . R. E , Richard Henry Seamon, Inherent Rulemaking Authority of an Independent Judiciary ED , Ronald J. Allen, Bosworth, F 892, 894 (1982). “[T]he word ‘presumption’ is merely a label applied to See See See, e.g. . , he failed to spell out exactly how that presumption should itself only added to the problem. Following his description Gaubert 507, 527 (2002). “Everybody knows that ‘procedure’ and ‘substance’ are But the ambiguous language of Justice White’s decision in EV . The Rules Enabling Act of 1934, While Justice White crafted a rebuttable presumption in 152. 150. United States v. Gaubert, 499 U.S. 315, 324–25 151. (1991). 149. EV 833, 848–49 (1985) (“Burden of proof, likewise, is characterized as substan- 149 . EV stated, “For a complaint to survive a motion to dismiss [pursuant to the DFE], it must allege facts which would support the challenged a actions are not the finding kind of conduct that can that be said to be grounded in the policy of the regulatory regime.” U. L. R R United States, 984 F.2d 1100, 1105 United States, n.7 992 F.2d (10th 1523, 1526 n.6 Cir. (11th Cir. 1993); 1993)). then citing Autery v. questioned whether the decision created a framework for dealing with burden of proof in the context of the DFE. In particular, they have grappled with [motion to dismiss] language from Justice White’s majority opinion.”) (first citing Kiehn v. Gaubert function in presenting and proving evidence during tion. The FTCA vagueness in Justice litiga- White’s statement is only further ex- acerbated by the inherent and widespread and disagreement over the definition ambiguity, and application of “presump- confusion, tions” generally, despite Federal Rule of Evidence 301. Gaubert of the various manipulations of other judicial prerogatives . . . . Rule 301, in short, has tive for Erie purposes and procedural for conflicts purposes.”) (citing Sampson v. Channell, 100 F.2d 754, 762 (1st Cir.), indeed any, bright line to mark off bank, their respective preserves.” Stephen B. Bur- their property. Practice and procedure may be described as the legal machinery by which substantive law is made effective. James R. Wolf, The boundary, however, is imprecise.” L. R elusive words that must be approached in context, and that there can be no one, 302to rules of evidence in NYU general and lar. ANNUAL burdens of SURVEY proof in OF particu- AMERICAN LAW [Vol. 73:275 \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 28 22-MAY-18 12:55 rules provide otherwise, the party against whom a presumption is directed has the burden of producing evidence to rebut the presumption. But shift this the burden of rule persuasion, which does remains on the not party who had it originally.” Id. See also, e.g. Civil Actions—An Anatomy of Unnecessary Ambiguity and a Proposal for Reform short phrase coupled with the lack of clarity on the Idaho L. Rev. 37, 91–9237, Rev. “substan- L. be Idaho may proof of burdens how (explaining (2006) tive” for purposes of Erie analysis but “procedural” for purposes of conflicts law); Lea Brilmayer & Ronald D. Lee, Comparative Study of Federal Jurisdiction and the Conflicts of Law sumption has led to the aforementioned division among courts. 40268-nys_73-2 Sheet No. 76 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 76 40268-nys_73-2 40268-nys_73-2 Sheet No. 77 Side A 05/23/2018 07:56:14 was Niles, see Gaubert Parrott v. United 154 . See Arbaugh note 10, at 1323)); supra The Court’s relative silence on the 153 (citing Niles, Id. note 11, at 557 n.226. “In appropriate cases, some excep- does not support assigning the burden of proof note 10, at 1327. supra supra methods of statutory construction that wrongly infuse Gaubert Sisk, See Id. note 10, at 1313 (“[DFE was enacted because] courts are ill suited, however No matter the criticisms of the Court’s decision, Arbaugh 154. Some commentators have asserted that even though other Section 2680 153. Niles, States, 536 F.3d 629, 634 (2008) (“[T]he question is court not to the render competence a of binding the judgment.”) (quoting United States F.3d v. 381, 389 Cook (7th Cty., Cir. 167 1999)). “political question” doctrine.’” supra to demonstrate), ripeness and standing of doctrines justiciability traditional the (as address disputes involving broad questions of policy with a potentially prospective impact on large numbers of people.”). Such of separation the in interests prudential or constitutional with provision the an infuses understanding of the DFE that powers or justiciability is based on theoretical shaky ground. substantive exceptions may be nonjurisdictional, the considered a jurisdictional DFE prerequisite because its text must and purpose deal with jus- nevertheless be ticiability. tions to the FTCA may limitations on the federal judiciary. For example, the discretionary function excep- have jurisdictional implications by tion is grounded in way ‘separation of powers concerns.’ Accordingly, as I have written of justiciability previously, ‘the discretionary function exception appears to be a species of the not intended to alter how courts apportion the burdens pleading or pleading burdens the apportion courts how alter to intended not proof for the DFE. Instead, federal courts must reject discredited, pre- the exception with jurisdictionality and adopt a burden allocation scheme that optimizes efficiency in litigating the applicability of the DFE and promotes the goals of the FTCA as a whole, such as trans- parency, compensation, and deterrence. assigning the burden to the plaintiff. Third, those lower courts that have assigned the burden to the plaintiff have done so on the basis of the discredited view that the site—the DFE kind is of mistaken a “jurisdictional drive-by jurisdictional ruling” prerequi- that the Supreme Court has been trying to fix since to the plaintiff. Second, nothing in the legislative history supports served neither to clarify the law of presumptions nor to ensure its consistent appli- cation.” 2018] commentator observed, “The Court failed to discuss what kind showing of would DISCRETIONARY be sufficient FUNCTION for EXCEPTIONa plaintiff prior to a motion to dis- miss (which means in her complaint and prior to discovery) to re- but the ‘presumption’ . . . .” 303 \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 29 22-MAY-18 12:55 procedural procedural impact of its among courts decision on the also burden of proof. resulted Courts the burden of proof to the plaintiff must that reconsider their positions. in have assigned the division First of all, 40268-nys_73-2 Sheet No. 77 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 77 40268-nys_73-2 40268-nys_73-2 Sheet No. 77 Side B 05/23/2018 07:56:14 . 158 TUD , 1997 S EGAL J. L , 26 738 (2012). But assigning the § 337 (John W. Strong L.J. 156 ALE Y An Economic Approach to the Law the to Approach Economic An VIDENCE E , 121 ORMICK ON First, one must identify the underly- the identify must one First, C C 159 M Furthermore, the Court did not assign Richard A. Posner, A. Richard The Economic Analysis of Evidence Law: Common Sense Burdens of Proof 155 1477, 1502–16 (1999); Bruce L. Hay & Kathryn E. . clear-statement principle for jurisdictionality . On the other hand, the mere fact that the Pleading and Proof: The Economics of Legal Burdens EV 1619, 1662 (2001) (demonstrating that even classic com- . EV . L. R C. The DFE Is an Affirmative Defense Gaubert Arbaugh TAN Louis Kaplow, S . L. R A see Richard Lempert, Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994) V 1, 1 (1997) (citing 2 . , 51 See See Id. also see id.; generally See EV 157 , 87 Burdens of Proof in Civil Litigation: An Economic Perspective Since the Instead, the DFE burden allocation scheme requires stronger, 155. 156. Thomas R. Lee, 159. 157. 158. confirms confirms that the DFE was not intended to be a jurisdictional pre- requisite, it is no longer self-evident plaintiff in FTCA that actions maintains the burden of the proving the non- jurisdiction-seeking applicability of the DFE. clearer reasoning. In recent years, commentators have been using economic models to explain the allocation of burdens of proof. ments on the burden of proof contained efficiency considerations). (citing McNutt v. Gen. Motors Acceptance Corp., 298 (presuming U.S. that 178, a 182–83 cause of (1936)) action lies outside of a jurisdiction, federal and court’s the subject-matter burden of establishing the contrary rests upon the serting jurisdiction). party as- Spier, 413 (1997). For a much broader economic perspective on burdens of proof in the legal system, Legal Burdens,” is a useful guide for consideration of the burden of proof for the DFE, and special knowledge of economics is unneces- import. their perceive to sary BYU L. R The law and economics justification for burden allocation, particu- larly as explained by Thomas Lee in his article, “The Economics of 304 NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:275 \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 30 22-MAY-18 12:55 on Stilts the burden in ing, social optimization functions performed by proof burdens civil inlitigation generally and then, keeping those functions in mind, determine the effects of assigning the burden for the DFE in FTCA ed., 4th ed. 1992). of Evidence burden based purely on an arbitrary framing of the issue or manip- ulation of syntax is results. sloppy methodology that leads to adverse idea that the government must bear applicability the of the exception. burden As with any of issue in civil litigation, proof it of the remains possible that either the plaintiff bears the burden of proof as an “essential” element of her claim or the government bears the burden of proof as an “affirmative defense.” DFE is non-jurisdictional and that the Court did not sign expressly the as- burden to the plaintiff does not necessarily support the 40268-nys_73-2 Sheet No. 77 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 77 40268-nys_73-2 40268-nys_73-2 Sheet No. 78 Side A 05/23/2018 07:56:14 VI- E The DFE ORMICK ON 162 C C It is well settled M 161 160 V. , 199 F.2d at 519. In contrast, “it is true that In the socially optimal burden alloca- note 140, at 2894 (citing 2 Stewart note 140, at 2894. 163 supra supra Stewart v. United States, 199 F.2d 517, 519 (7th Cir. 1952). “The note 156, § 337). “Burden of pleading” refers to the initial duty of Prescott v. United States, 973 F.2d 696, 702 (9th Cir. 1992) (“[A]n JUSTIFYING THE PROPOSED ASSIGNMENT See See supra , Demonstrating that the burden of proof for any issue should The “burden of proof” as heretofore used actually refers to 162. Colella & Bain, 163. 160. 161. Colella & Bain, be assigned to the defendant as an affirmative defense is a difficult task. The default rule is that the plaintiff bears the burdens of some courts have suggested that the exceptions of § 2680 are defenses to be and pled proven by the government . . . . We disagree successfully . invoked jurisdiction . by . a . pleading that Only facially after alleges matters a not plaintiff ex- has §by cepted applicability the prove to government the on fall burden the does 2680 of a specific provision of § 2680.” Carlyle v. U.S. Dep’t of the Army, 674 556 F.2d 554, (6th Cir. 1982). [§ 2680] exceptions referred to are available to the government as a defense only when aptly plead and proven.” introducing an issue into the matter. “Burden of production” refers to the duty to produce sufficient evidence on an issue to And “burden of persuasion” prevent refers to the duty to an persuade a fact-finder to a adverse requi- directed verdict. site degree of belief less risking an adverse decision. of production, and (3) the burden of persuasion. of burden the (3) and production, of three separate burdens: (1) the burden of pleading, (2) the burden exception to the FTCA’s general waiver of immunity, although jurisdictional on its face, is analogous to an affirmative defense . . . .”). 2018] litigation. Finally, weighing those party effects, upon DISCRETIONARY which FUNCTION assignment would EXCEPTION one further the goals of must the FTCA identify while minimizing the the social costs of litigation. Upon applying these steps, it is evident scheme minimizing the that social costs the of FTCA litigation socially burden assigns of proof to the 305 the government. In optimal other words, the applicabil- burden allocation ity of the DFE is an affirmative defense. \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 31 22-MAY-18 12:55 DENCE tion scheme for the DFE, the government must plead, produce evi- dence, and persuade the fact-finder (which FTCA is cases) that a the exception federal applies to judge each discrete in act within its course of conduct or risk losing on the issue. This burden alloca- tion scheme minimizes the direct FTCA litigation, and furthering error the costs statute’s flowing goals compensation. of from deterrence and should be no exception. that the party carrying the burden of pleading an issue usually also carries the burdens of production and persuasion. 40268-nys_73-2 Sheet No. 78 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 78 40268-nys_73-2 40268-nys_73-2 Sheet No. 78 Side B 05/23/2018 07:56:14 If the plaintiff then the defen- 166 167 note 156, § 337 (“The burdens of This rule is generally preferable generally is rule This supra 164 , VIDENCE Since the primary function of pleading is E 165 A. The Burden of Pleading at 13. note 156, at 7. First, this slight advantage for the defendant mini- ORMICK ON See id. 168 C supra C at 6. at 11. M Id. Id. Assigning the burden of pleading to the plaintiff on all issues is Similarly, the default rule places the burden of proof for any 164. 2 165. Lee, 166. 167. In other words, in light of the evidence the fact-finder is just as likely to 168. mizes post-judgment direct costs associated exclusively with a ruling in favor of the plaintiff. costs associated Remedy, with post-judgment enforcement, compensation and are all transaction saved if 306issues. all for proof and pleading NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:275 \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 32 22-MAY-18 12:55 the clearest and simplest allocation scheme. The legal system would not need to waste resources determining which party which must issues. Instead, plead the plaintiff could plead affirmatively sues all part is- of her prima facie case in tively addition to pleading affirma- “the absence affirmative defenses.” of those matters [usually] categorized as to facilitate communication and signaling between the parties as to the issues being disputed, the clearest, simplest rule minimizes the direct costs of inefficient signaling in litigation. dant prevails so “tiebreaker.” that the burden effectively functions as a assured that only those raised in the complaint will be implicated in the case. issue on the plaintiff. Under this allocation scheme, when the evi- dence for a certain issue supports a ruling in favor of the defendant just as much as a ruling in favor of the plaintiff, bears the burden of pleading for all issues, then both parties can be because because it minimizes certain direct social costs that necessarily arise out of any litigation. However, deviating from the default allocation scheme can be justified as long as other costs are sufficiently econo- mized. First, though, one must comprehend the costs minimized by the default rule before demonstrating how other outweigh them when shifting the saved burden of proof to the defendant costs can for certain issues, such as the DFE. pleading and proof with regard to most facts have been and should be assigned to the plaintiff who generally seeks to change the therefore present naturally state should of affairs be and expected who persuasion.”). to bear the risk of failure of proof or make an error judgment in favor of the plaintiff as an error judgment in favor of the defendant. 40268-nys_73-2 Sheet No. 78 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 78 40268-nys_73-2 40268-nys_73-2 Sheet No. 79 Side A 05/23/2018 07:56:14 170 As explained 173 The costs of pleading of costs The 172 Second, the default rule econ- 169 Obliging plaintiffs to plead the absence of facts giving FDIC v. Meyer, 510 U.S. 471, 477 (1994) (“[A] claim is actionable at 12. at 14–15. at 7. at 29 n.92. Id. Id. Id. Id. See 171 Generally, assigning to the defendant the burden of pleading Despite the default rule economizing the costs of litigation and The relationship between FTCA §§ 1346(b) and 2680(a) oper- 169. 170. 171. 172. 173. counter-balancing costs that justify shifting the burden to the defen- the to burden the shifting justify that costs counter-balancing dant on certain issues. These found counter-balancing in costs the can pleading and all proving be of weighing the costs minimized by assigning the burdens the to the plain- DFE. Therefore, upon tiff against those minimized by assigning to courts must adopt an optimal allocation scheme for FTCA litigation the government, the that lays the burdens of pleading and proof upon the government. issues that do not coincide with those elements indispensable to a plaintiff’s claim can minimize the direct costs facie of elements are those issues pleading. that inevitably arise Prima for a plaintiff to prevail, while affirmative defenses quently. are those that arise less fre- post-judgment compensation detailed above, there are other 2018]the defendant is not found liable. DISCRETIONARY FUNCTION EXCEPTION 307 \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 33 22-MAY-18 12:55 rise to an affirmative defense cases is in unnecessarily which the costly issue in would have all diminish- cluttered, never and extensive needlessly become pleadings The those been raised otherwise. ing the value of Therefore, assigning the burden their of pleading sporadically-raised, af- communication and signaling firmative defenses to the defendant functions. removes the costs of even rais- cases. of number vast the in issues these ing above, a plaintiff cannot either invoke succeed the on court’s the jurisdiction merits or of her claim unless she can prove that her omizes omizes on the pre-judgment direct costs of litigation by plaintiffs’ deterring claims that are based on indeterminate liability. Favoring the defendant in the case of a “tie” claim at the will substantive and evidentiary margin from ever filing suit deter the plaintiff with a because she knows she can only prevail if finder she that her persuades case the is more fact- convincing than the defendant’s. affirmative defenses are expended only when necessary. ates similarly to the relationship between prima facie elements and affirmative defenses in other actions. As the threshold provision of the FTCA, § 1346(b) outlines the elements claim necessary against for the any government tort to be “actionable.” under § 1346(b) if it alleges the six elements outlined . . . .”). 40268-nys_73-2 Sheet No. 79 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 79 40268-nys_73-2 40268-nys_73-2 Sheet No. 79 Side B 05/23/2018 07:56:14 176 the how whether The direct costs No matter what, 178 174 the government was whether the government is alleged to have been how it is certainly not raised in every FTCA 177 note 156, at 7 (“[A]n ‘affirmative defense’ might be de- note 4, at 1541. note 156, at 8. supra supra supra Whisnant v. United States, 400 F.3d 1177, 1185 (9th Cir. 2005) Lee, For instance, the question of See See 175 Another justification for assigning to the defendant the burden the defendant the to assigning for justification Another But the issue of DFE applicability, whether the employee’s con- 178. Lee, 177. Levine, 175. 176. 174. 28 U.S.C. § 1346(b)(1) (2012 & Supp. 2016). negligent is critical.”) (citation omitted). fined as a matter not ordinarily expected to coincide with the elements entitling to prevail on a certain issue.”). (“While the district court is correct to the extent that the question of government was negligent is irrelevant to function exception, the the question applicability of of the discretionary Thus, while the provision may be the most “frequently litigated of the FTCA’s exceptions,” 308 claim is (1) against the United States NYU(2) for for injury or loss of property, or personal injury or death (4) caused money ANNUAL damages (3) SURVEY OFby AMERICAN negligent or LAW wrongful act or omission of Government (5) any while acting employee within of the scope [Vol. the of 73:275 his employment, (6) under circumstances where the United States, if a private per- son, would be liable to the claimant in accordance with the law of the place where the act or omission occurred. \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 34 22-MAY-18 12:55 of pleading an issue is pleading that issue because is lower than the the plaintiff’s. defendant’s relative cost of action. Obligating the plaintiff to plead the non-applicability of the DFE, even when the issue is not guaranteed to be relevant, par- the causes between signaling and communication in costs unnecessary ties. By shifting the burden to the government, those costs will only be expended in cases in which the exception is guaranteed to arise. of pleading an issue are tied proportionally to the scope of the issue the of scope the to proportionally tied are issue an pleading of in dispute. The broader the issue, the higher the costs of efficiently signaling and communicating the legal party. parameters Furthermore, the to broader the the issue, the higher other the costs initially of investigating the factual basis of the allegations. Therefore, if one party’s “version” of the issue in question is narrower than the other’s, assigning the burden of pleading to that party economizes negligent is material in every FTCA action, but the question of the actor was negligent is only relevant when applying the DFE. duct was the grounded exercise in of policy, does an not ments. authorized inevitably coincide discretionary with these function ele- each and every one of these issues will arise and the direct costs of pleading them must be expended in an FTCA action. 40268-nys_73-2 Sheet No. 79 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 79 40268-nys_73-2 40268-nys_73-2 Sheet No. 80 Side A 05/23/2018 07:56:14 183 Stew- placing the Stewart, decision to the ex- Stewart Both require that the facts 184 explained, the circuit courts’ Prescott It would require the plaintiff in her com- The FTCA plaintiff’s “version” of the issue is . As the Seventh Circuit reasoned in 181 observed the “preposterous” result that ensues 180 For example, if a plaintiff in a contract enforcement Carlyle . . . 179 Carlyle v. U.S. Dep’t of the Army, 674 F.2d 554, 556 (1982) (“We Prescott v. United States, 973 F.2d 696, 702 (9th Cir. 1992). “Today, . 182 Id Id. See See The Sixth Circuit later criticized the Just as a plaintiff pleading the absence of mistake must account must mistake of absence the pleading plaintiff a as Just Just a few years after the FTCA was enacted, when courts were 179. 180. Dolan v. U.S. Postal Serv., 546 U.S. 181.481, 485 (2006). Stewart v. United States, 199 F.2d 517, 182. 520 (7th Cir. 1952). 183. 184. plaint to “negative” all of the thirteen § exceptions enumerated 2680, as opposed in to assigning the burden of pleading to the gov- ernment who can raise just a single exception, such as the DFE, as a defense. cability of the DFE would also have to allege the non-applicability of non-applicability the allege to have also would DFE the of cability every other exception contained in §the 2680. thirteen substantive Section categories for 2680 which Congress lays qualified its out waiver of sovereign immunity in the FTCA, of which the DFE is only a single exception. action action were obliged to plead the absence of mistake, she must count for the parties’ belief of accurate facts pertaining to each and ac- every provision in the entire contract. Instead, the the defendant burden has of pleading mistake because she can point to provision a single whose underlying facts she or the believed to plaintiff be true. inaccurately for every provision in a contract, a plaintiff pleading the non-appli- But as the Ninth Circuit in 2018]costs. the on DISCRETIONARY FUNCTION EXCEPTION 309 \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 35 22-MAY-18 12:55 from assigning the burden of pleading the non-applicability of the DFE to the plaintiff. not merely the non-applicability of the DFE but rather the non-ap- plicability of every single one of the §legal and factual scope of 2680 the plaintiff’s version exceptions. is so much Since greater, the the relative cost of pleading for the plaintiff is much greater for than the government. just starting to grapple with the statute, the Seventh Circuit in art v. United States tent that it assumed assigning the burden of pleading the the plaintiff requires the plaintiff DFE to plead every other exception. to burden on the plaintiff would ‘impose upon the plaintiff the burden of proving positions are actually in agreement. disagree with Stewart . . . that the plaintiff must §disprove every 2680 exception . under . . .”). we follow [the Sixth and Seventh] circuits and adopt the rule Sixth as Circuit in set forth by the 40268-nys_73-2 Sheet No. 80 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 80 40268-nys_73-2 40268-nys_73-2 Sheet No. 80 Side B 05/23/2018 07:56:14 The The 185 187 Shifting the bur- 189 B. The Burden of Proof , 199 F.2d at 520). note 156, at 16. Stewart The defendant will invest in the production of that supra 186 at 16–17. at 19. Id. Id. Id. Id. Consider how the doctrine of res ipsa loquitor functions in Just as social cost optimization justifies shifting to the defen- There are two chief instances when the defendant can access 188 185. Lee, 186. 187. 188. 189. at 702 (quoting dant the burden of pleading certain issues, such as the DFE, so too does it justify shifting the burden of proof. For instance, there are issues in any litigation for which a defendant can duce access core and evidence, pro- evidence that both parties will their use respective arguments, at a lower cost than the plaintiff. as part of medical malpractice tort cases. If the accident occurred while over- must she then room, operating an in unconscious was plaintiff the come prohibitive costs to access and produce evidence showing the defendant’s negligence whereas the defendant recorded and main- tained relevant evidence during the procedure. [thirteen] negative averments. Such a result would border on the preposterous.’” Id. 310 alleged in the plaintiff’s complaint must be NYU facially outside of DFE, which actually minimizes the direct costs of litigation by deter- ANNUALthe SURVEY OFring AMERICAN plaintiffs from filing claims obviously barred by the LAWexception. However, assigning to the plaintiff the [Vol. burden 73:275 of pleading specifi- cally and particularly the non-applicability of the DFE along with all of the other § 2680 exceptions has the opposite effect. \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 36 22-MAY-18 12:55 dant’s efforts. and produce evidence at a lower relative cost than the plaintiff: (1) when the issue in question involves conduct where the plaintiff may not have been involved and (2) when the defendant has incentives superior to keep records of the interaction giving sue. rise to the is- core evidence before and at a lower cost than the plaintiff because if there is a “tie,” which is the default outcome of litigation before evidence is produced, the plaintiff defendant will will not lose have her to case. waste resources duplicating the defen- ensures that the party who can access and produce evidence central den of proof for the absence of negligence to the defendant burden of proof properly incentivizes the defendant as the cost “least- producer” to initially produce then be shared by both parties such each offering their own formulation core evidence that can of the facts. 40268-nys_73-2 Sheet No. 80 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 80 40268-nys_73-2 40268-nys_73-2 Sheet No. 81 Side A 05/23/2018 07:56:14 192 Assigning the 193 191 Since the burden of proof 194 prongs rely on statutes, regula- Gaubert note 5, at 133 (“Imagine for a moment the supra note 156, at 5 (“Error costs are the social costs associated The government’s superior familiarity with these supra (“[T]he government is necessarily in a better position to deter- 190 Bosworth, Lee, See See id. See Second, since the government is in the business of formulating In FTCA cases, the government can access and produce core The second optimization justification for generally assigning 190. 191. 192. United States v. Gaubert, 499 U.S. 315, 325 (1991). 193. Prescott v. United States, 973 F.2d 696, 700 (9th Cir. 194. 1992). and implementing policy, whether it the conduct can at issue is more “susceptible to policy effectively analysis.” demonstrate cies and procedures contained in employee manuals and internal memoranda. statutes, regulations, and policies also places it in a better position or acts certain govern potentially them of any whether determine to omissions in a given course of conduct. During the court’s “particularized and fact-specific much more inquiry,” reasonable and it efficient for is the policy experts in gov- ernment rather than the private citizen whether plaintiff “the to acts initially or show omissions in question based flowed on from social, a economic, choice and political policy.” 2018]to both parties’ version of the facts at the lowest relative cost will do so. DISCRETIONARY FUNCTION EXCEPTION evidence on the applicability of the DFE at plaintiff. a First, lower both cost of than the the 311 of course a prescribe either may that procedures and policies, tions, conduct or authorize the use of policy discretion. The government inevitably retains a comparative advantage statutes and regulations in available in the public record but also poli- accessing not only \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 37 22-MAY-18 12:55 handbooks and internal memoranda . . . unavailable to . laypersons or [T]he lawyers.”). majority of these policies are mine whether such policies apply to a FTCA case.”). with erroneous legal judgments . . . includ[ing] decisions for undeserving defend- ants . . . and decisions for undeserving plaintiffs . . . .”). thousands of federal statutes or regulations—that only the government could pos- sibly be aware of—that apply to any given factual scenario. Moreover, consider the myriad ‘policies’ that have been promulgated by federal agencies within employee theoretically functions as a tiebreaker, it is only dispositive when burden of proof for the applicability of the DFE to the government guarantees that the least-cost producer will be incentivized tially to provide ini- core evidence on the issue. the burden of proof for an issue to the error defendant costs, is the social to costs minimize incurred when the fact-finder makes decision a in favor of the wrong party. 40268-nys_73-2 Sheet No. 81 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 81 40268-nys_73-2 40268-nys_73-2 Sheet No. 81 Side B 05/23/2018 07:56:14 note supra , 196 VIDENCE E Liability is indeter- 195 Defenses may be “disfa- This justification for as- ORMICK ON 198 note 140, at 2895–96 (“[T]he real- C 197 C M supra Colella & Bain, see at 13. at 11. at 20–21. at 21–22; Id. Id. Id. Id. When an erroneous decision in favor of the defendant is cost- The default rule assigning the burden of proof to the plaintiff The harm suffered by an individual forced to bear the entire 195. 196. 197. 198. decision in favor of the plaintiff. indeterminate, However, it is even possible for when error costs liability to be is unequal. lier than an erroneous decision in each equally favor deserving to prevail, assigning of the burden of the proof to plaintiff, despite the defendant minimizes error costs. is intended to deter plaintiffs from bringing suits of indeterminate liability in order to minimize the direct costs based of upon the assumption litigation. that the costs This of an erroneous decision is in favor of the defendant are equal to the costs of an erroneous 312 liability is indeterminate based on the record. NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:275 \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 38 22-MAY-18 12:55 signing the burden of proof to the defendant corresponds judicial to edict that the substantive or policy determinations, derived ei- ther from legislative expressions of policy or the judiciary’s view of the principles at stake, may impel the courts to use burden alloca- tion to discourage “disfavored” claims. can discourage “disfavored” defenses by slightly raising the hurdle for their success and encourage plaintiffs to file suits of indetermi- nate liability in furtherance of policy goals. In the socially is claim plaintiff’s the barring DFE the applying erroneously FTCA context, costlier than erroneously failing to apply the exception allowing the plaintiff’s claim to proceed. When the evidence is unclear whether the government actor was using authorized discretion dentally injuring when the plaintiff, the policy goals of acci- the FTCA, such as transparency, compensation, and deterrence, waiving weigh sovereign immunity in rather than favor barring the the of DFE. claim under burden of governmental negligence is greater than the sum of inci- vored” because they intended to further deter certain policy plaintiffs goals. Thus, burden from allocation initiating litigation ity of burden allocation is in keeping with Professor McCormick’s suggestion . . that burden allocation can also turn on ‘special policy considerations such as those . disfavoring certain defenses.’”) (quoting 2 156, § 337). minate minate when ex ante a decision for the often plaintiff as it is is correct erroneous or, just in other as words, when it is equally likely that the plaintiff and the defendant deserve to prevail. 40268-nys_73-2 Sheet No. 81 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 81 40268-nys_73-2 40268-nys_73-2 Sheet No. 82 Side A 05/23/2018 07:56:14 203 it must be assumed that the 201 Leaving a claimant “destitute or VI. 199 Davis v. Fed. Emergency Mgmt. Agency, 556 A. Pleadings ex rel. note 20, at 282. SHOULD FUNCTION because of an erroneous application of the 200 supra HOW THE PROPOSED ASSIGNMENT 28 C.F.R. § 14.9(a) (2017) (“The notification of final denial may in- Nelson, Id. See See Furthermore, even among those disagreeing on the burden 202 To grasp how this allocation scheme should operate procedur- Thus, once the plaintiff commences her action, the complaint 199. Rayonier Inc. v. United States, 352 U.S. 200. 315, 320 (1957). 201. 202. 203. St. Tammany Par. the plaintiff must initially request relief is not required to notify the plaintiff of its reason for final denial, ally, one must begin before the action is even commenced. Presum- ably, the requirements plaintiff of administrative will presentment and exhaustion lined comply in out- 28 U.S.C. §§ with 2401(b) and 2675(b) plaint before in the filing federal her com- court. Since the FTCA’s government agency from whom procedural Thus, while the plaintiff does not bear the burden of pleading the 2018] dental harms borne by each taxpayer when the government pensates an com- individual DISCRETIONARY claimant. FUNCTION EXCEPTION 313 \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 39 22-MAY-18 12:55 of proof question, “in the context of a motion to dismiss, the courts have widely held that the plaintiff must . . . plead facts that facially allege matters outside of the discretionary function exception.” tween an erroneous application of the DFE and an erroneous nial de- of the government’s motion to dismiss. grievously grievously harmed” DFE is socially costlier than plaintiff’s mistakenly claim permitting that the to DFE proceed was meant a burden to bar. of By proof assigning for the the FTCA DFE claims at to the the margin of government, the DFE’s plaintiffs substantive scope incentivized with to will bring be their suits, fulfilling the remedial purpose of the statute. This allocation also saves the social cost difference be- plaintiff is not aware why her claim was rejected. is vital to determining the applicability of the DFE because the facts alleged in the complaint provide the starting basis for arguments in pre-trial motions, where the curs. vast majority of DFE litigation oc- clude a statement of the reasons for the denial.”). F.3d 307, 315 n.3 (5th Cir. 2009). 40268-nys_73-2 Sheet No. 82 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 82 40268-nys_73-2 40268-nys_73-2 Sheet No. 82 Side B 05/23/2018 07:56:14 208 211 But, I argue, 209 Rather, the plaintiff must 207 As the party asserting jurisdiction, it is it jurisdiction, asserting party the As However, since the DFE is non-jurisdic- 205 206 , 674 F.2d at 556. Thus, a plaintiff cannot plead facts that on their , 199 F.2d at 520 (“[T]he necessity for negativing such excep- Carlyle , Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007) Stewart v. United States, 199 F.2d 517, 520 (7th Cir. 1952) (“It is , 210 Carlyle v. U.S. Dep’t of the Army, 674 F.2d 554, 556 (1982) (“Be- , 199 F.2d at 519 (quoting Boyce v. United States, 93 F. Supp. 866, FDIC v. Meyer, 510 U.S. 471, 477 (1994) (“A claim comes within this See Stewart See, e.g. See Stewart See, e.g. See, e.g., Contra state a substantive FTCA claim under the six elements pre- Some courts have interpreted this widely held requirement as The plaintiff’s complaint must contain facts that at least plausi- 210. Xechem, Inc. v. Bristol-Myers Squibb Co., 372 F.3d 899, 901 (7th 211. Cir. 204. 205. 208. 209. 206. 207. 204 assigning the burden of pleading to the plaintiff. 2004). (“[W]e . . . require . . . only enough facts to state a claim of relief that is plausible on its face.”). 314 non-applicability of the DFE, the facts that she alleges NYUin the com- plaint ANNUALmay nevertheless doom her SURVEYclaim. OF AMERICAN LAWbly [Vol. 73:275 \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 40 22-MAY-18 12:55 §the of negative the plead to required not is she However, 1346(b). DFE or any other the exceptions contained in § 2680. that would show its non-applicability. such is not the case. Instead, the plaintiff’s gous requirement to is the analo- Seventh Circuit’s approach to the elements complaints of containing an affirmative defense: If the the plaintiff ingredients “admits of all an impenetrable defense” despite also all of alleging the elements of a viable claim, then she may “plead [herself] out of court.” face alone would establish the applicability of the DFE, despite also alleging all of the essential elements for an FTCA claim outlined in tional, the plaintiff does not bear a similar burden to plead facts scribed by § 1346(b), jurisdiction. matter subject which concurrently establish the court’s allege facts in her complaint that do not “show upon their face the applicability of the ‘discretionary function’ exception.” incontrovertible that the plaintiff bears the burden of pleading, and pleading, of burden the bears plaintiff the that incontrovertible later proving, these facts. cause § 2680 clearly limits the invoke jurisdiction jurisdiction of the only federal if courts, a § the plaintiff 2680.”) can complaint (citations omitted). is facially outside the exceptions of 868 (S.D. Iowa 1950)). such proving of burden the plaintiff the upon impose would complaint the in tions jurisdictional grant—and thus is ‘cognizable’ under § 1346(b)—if it is under actionable § 1346(b). And a claim is elements actionable outlined above.”) (quoting under Loeffler v. §Frank, 486 U.S. 549, 562 1346(b) (1988)). if it alleges the six a universal rule, so far as we are aware, that a party who invokes the jurisdiction of a federal court must allege all facts necessary to give the court jurisdiction of subject the matter.”). 40268-nys_73-2 Sheet No. 82 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 82 40268-nys_73-2 40268-nys_73-2 Sheet No. 83 Side A 05/23/2018 07:56:14 216 , 674 , I would Carlyle 218 . 217 Gaubert The plaintiff must remain 213 that “[f]or a complaint to survive note 140, at 2929 (“Some lower courts have inter- note 140, at 2868–69. Gaubert note 5, at 125 (“At most, Justice White’s iteration was supra note 5, at 125. supra of the DFE is no simple task, especially when supra , however, is overbroad.”). United States v. Gaubert, 499 U.S. 315 (1991). 212 supra notes 153, 163, 165 and accompanying text. Gaubert , 674 F.2d at 556. Bosworth, 215 See supra See Carlyle See generally Otherwise, the plaintiff’s complaint would not survive a facial Once the plaintiff has pleaded facts that do not show on their Because of the pitfalls that could befall FTCA plaintiffs, Justice The The plaintiff’s requirement to plead matters that are at least 215. Colella & Bain, 216. Gaubert, 499 U.S. at 324-25. 217. 218. 212. 213. Bosworth, 214. 214 face the applicability of the exception, the government’s hurdle to cross in its motion to dismiss is much higher. While some commen- tators have criticized this approach as “impos[ing] on the plaintiff White reminded them in “facially “facially outside” a reminder to plaintiffs like Gaubert . conduct . that would . not that obviously their be captured complaints by ought statutes.”); said Colella & Bain, to agencies’ allege regulations and preted this language to mean that FTCA pleading plaintiffs and bear proving the that ultimate the burden discretionary of function This exception reading of does not apply. guage as assigning the burden of pleading to plaintiffs. preposterous.”); the on border would result a Such averments. negative F.2d at 556. As discussed above, many lower courts have misinterpreted this lan- 2018] DISCRETIONARY FUNCTION EXCEPTION 315 \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 41 22-MAY-18 12:55 attack by the government’s Fed. R. Civ. P. 12(b)(1) or 12(b)(6) mo- tion to dismiss that does complaint. not even raise matters outside of the the cause of action arises out of government activity in a highly reg- ulated area in which government actors are authorized to maintain wide discretion for decision-making. argue, though, that Justice White was simply instructing that their plaintiffs complaints must not be facially defective in reference to the substantive standard for the DFE detailed in a motion to dismiss, it must allege facts which would support a find- can that conduct of kind the not are actions challenged the that ing be said to be grounded in the policy of the regulatory regime.” Home Owner’s Act that expressly grants discretionary authority to prescribe regulations to the Federal Home Loan Bank Board and then base her negligence claim on that very discretionary ity. author- aware not to allege facts regarding the government actor’s consider- actor’s government the regarding facts allege to not aware ation of policy factors or a statute or regulation granting discretion that obviously authorized the conduct in question. For instance, a plaintiff’s complaint should not reference in her complaint the 40268-nys_73-2 Sheet No. 83 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 83 40268-nys_73-2 40268-nys_73-2 Sheet No. 83 Side B 05/23/2018 07:56:14 For now, courts 224 Those that treat motions to dismiss this line of criticism fails to consider 223 219 note 140, at 2925. B. Motion to Dismiss supra However, as it becomes increasingly acknowl- 220 note 225. , Heckler v. Ringler, 466 U.S. 602, 616 (1984) (“The common-law Courts are split on whether the defendant’s motion to 28 U.S.C. § 1361 (2012) (“The district courts shall have original juris- at 2870. Analogous to the issues underlying the FTCA and DFE, 222 See, e.g. Id. See See infra 221 This same question has recurred in a similar context, motions Once the plaintiff has filed her complaint, the government 222. 223. Liberty Fund, Inc. v. Chao, 394 F. Supp. 2d 105, 114 (D.D.C. 2005). 219. Colella & Bain, 220. 221. 224. Montez v. Dep’t. of the Navy, 392 F.3d 147, 150 (5th Cir. 2004). diction of any action in the nature of mandamus to compel an officer or employee of the United States plaintiff.”). or any agency thereof to perform a writ of mandamus, as codified in 28 U.S.C. § duty 1361, is intended to provide a remedy owed to the for a plaintiff only if . . . the defendant owes him a clear nondiscretionary duty.”). Courts have found jurisdictional and merits issues in FTCA actions similarly “inter- twined.” limitations on the courts’ jurisdiction, the tionally government moved to dismiss has FTCA claims pursuant tradi- to the DFE under Rule 12(b)(1). edged that the DFE is not a limitation on the courts’ adjudicatory authority but rather on the plaintiff’s entitlement to relief, the gov- ernment may be required to move to dismiss under Rule 12(b)(6). to dismiss claims § for 1361. mandamus relief § pursuant 1361 grants jurisdiction to to the district courts to compel a 28 federal officer to perform a ministerial, non-discretionary duty owed U.S.C. to the plaintiff. 316 only a wafer-thin burden,” NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:275 must decide whether to should be plead dismissed because relief and is barred prove by the the that DFE. DFE Because and plaintiff’s other claim § 2680 exceptions have long been treated as \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 42 22-MAY-18 12:55 dismiss goes to a defect in subject matter jurisdiction or failure state to a claim because the question of jurisdiction under §intertwined with the 1361 merits.” “is can adopt the same approach for the DFE. But as more recognize that the exception is non-jurisdictional, they will no longer have to justify their approach based on the “intertwined” nature of the ju- as challenging the merits of the claim under Rule 12(b)(6) opt to do so because the “issues of fact are central to both subject matter jurisdiction and the claim on the merits . . . .” that the DFE is non-jurisdictional and should function as an affirm- ative defense. 40268-nys_73-2 Sheet No. 83 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 83 40268-nys_73-2 40268-nys_73-2 Sheet No. 84 Side A 05/23/2018 07:56:14 supra Colella & Bain, test is met and the See Gaubert 12(b). . P. IV . R. C ED F 227 And while the plaintiff bears the burden of showing In ruling on a Rule 56 motion and considering matters Olson v. United States, 306 Fed. App’x 360, 363–64 (9th Cir. 2008) 226 225 See To meet its burden, the government must produce evidence When the government mounts a factual attack, regardless of In its motion, the government may mount a facial or factual 225. Every circuit court that has considered the question has endorsed Rule 226. 227. Miller v. United States, 163 F.3d 591, 594 (9th Cir. 1998) (citing Prescott note 140, at 2867–71 (discussing Rule 12(b)(1) conversion in FTCA actions). As and persuade the court that the only reasonable inferences that can that inferences reasonable only the that court the persuade and be drawn from the undisputed factual record discrete establish act in that the each government’s course of conduct was the subject DFE. to Upon examining the evidence produced by ment, the the plaintiff govern- may produce her own contravening evidence or outside of the pleadings, the court must make all reasonable infer- ences from the factual record in favor of the plaintiff, the non-mov- ing party. move under Rule 12(b)(6), then conversion can no longer be justified by the “in- tertwined” standard. Nevertheless, under the Rules of Civil Procedure outside if of matters the pleading in Rule 12(b)(6) court, then are “the presented motion and shall be considered treated by as the one posed of for as summary provided in judgment Rule and 56.” dis- 12 “conversion” in FTCA actions on the grounds that the jurisdictional issues are “intertwined” with the underlying merits of the claim. the DFE is recognized as non-jurisdictional and the government is required to DFE applies. application on the face of the complaint plead- the outside matters raising attack factual a mount to have will and so the government ings that compel dismissal. whether it is moving to dismiss for lack of subject tion or failure to state a claim, the motion should be converted into matter jurisdic- and adjudicated under a Rule 56 motion standard. for summary judgment there are genuine issues of material fact, the government bears the ultimate burden of establishing that the 2018] risdictional and merits issues but rather simply because the DFE is exclusively a DISCRETIONARY merits FUNCTION EXCEPTIONissue. attack. The government will choose a facial attack when it can show that the plaintiff’s complaint is facially defective, meaning it can be 317 shown that the DFE applies based exclusively upon the facts alleged in the complaint. Essentially, in such a case, the plaintiff loses her claim by pleading herself out of plaintiff will court. have More alleged facts likely, that though, do not the obviously require DFE \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 43 22-MAY-18 12:55 (viewing factual record on plaintiffs). DFE applicability in light most favorable v. United States, to 973 F.2d 696, 702 the (9th Cir. 1992)). 40268-nys_73-2 Sheet No. 84 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 84 40268-nys_73-2 40268-nys_73-2 Sheet No. 84 Side B 05/23/2018 07:56:14 228 The govern- 229 It cannot simply frame 233 note 140, at 2930–931. Next, the government would show that note 140, at 2929–30. 231 230 supra supra , 499 U.S. at 324 (citing Dalehite v. United States, 346 U.S. 15, , GATX/Airlog Co. v. U.S., 286 F.3d 1168, 1174 (9th Cir. 2002) , 973 F.2d at 700. Colella & Bain, See Gaubert Prescott See See, e.g. 232 In presenting its argument, the government must disaggregate The government can accomplish this in a variety of ways: It can To meet its burden of production, the government may pre- 230. United States v. Gaubert, 499 U.S. 315, 325 (1999) (citing Berkovitz v. 231. 228. 229. Colella & Bain, 232. 233. grounded in the same policy considerations that the statute or reg- ulation intended to further; or, without actually presenting further evidence, it may formulate a hypothetical policy analysis that dem- onstrates the conduct analysis. in question is susceptible to that same the course of conduct in question into discrete acts, showing each discrete act that is protected by the DFE. submit testimony or documentary evidence showing that the actor actually considered policy in the decision-making or the course of conduct had policy implications; it can demonstrate that ployee or the agency em- was acting pursuant to a discretion-granting stat- ute or regulation creating a presumption that the conduct was sent all relevant statutes, regulations, policies, and procedures that potentially govern the course of conduct at issue. United States, 468 U.S. 531, 536 (1988)). 318 argue based on the core evidence in the existing record that genu- NYUine ANNUAL issues SURVEY of material OF fact exist FTCA AMERICAN claim. Once as the parties LAW to have produced all whether of their the evidence DFE and completed their arguments, the court must bars make a “particular- her [Vol. 73:275 ized and fact-specific inquiry” to determine whether the conduct in question was grounded in social, economic, and political policy. \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 44 22-MAY-18 12:55 the employee or agency’s course of conduct was grounded in policy considerations, the type of conduct that the DFE was intended protect from to tort liability. 36 (1953)). (“[W]hen determining whether the discretionary function exception is applicable, ‘the proper question to ask is not whether the Government as a whole had discre- tion at any point, but whether its allegedly negligent agents did in each instance.’) (citation omitted). a series of acts, omissions, and decisions by various actors at various times as a single, elastic, all-encompassing action. Such a formula- ment would then aim to show that none of the relevant regulatory, statutory, or procedural material produced prescribes a course specific of conduct to agency which failed to adhere. the allegedly tortious employee or 40268-nys_73-2 Sheet No. 84 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 84 40268-nys_73-2 40268-nys_73-2 Sheet No. 85 Side A 05/23/2018 07:56:14 237 235 , that op- 239 Berkovitz-Gaubert Gaubert have informed the , the plaintiff had the might Gaubert Id. The Discretionary Function Exception in there still must be evidence in the record note 10, at 1330. “Prior to 238 supra It must present evidence or analysis in the record , 20 QLR 55, 62 (2000) (“[T]he Second Circuit has relied upon a 236 Niles, Singh v. United States, 718 F. Supp. 2d 1139, 1145 (N.D. Cal. 2010) United States v. Gaubert, 499 U.S. 315, 325 (1999) (“The focus of the Peter H. Schuck & James J. Park, at 1135. If the government fails to persuade the court that just a See See See Id. See If the government highlighted a relevant, discretion- 234 240 Once the government has produced its evidence and/or policy Just as the government must disaggregate the course of con- 239. 240. 234. Prescott v. United States, 973 F.2d 696, 700 235. (9th Cir. 1992). 236. Terbush v. United States, 516 F.3d 1125, 1134 237. (9th Cir. 2008). 238. test to each discrete element . . . .”). peting social, economic, and safety policies duct. in its course of con- “waive the flag of policy as a cover for does anything . and everything . it . .” analysis, the plaintiff may respond. She can present a statute, regu- lation, policy, or procedure prescribing the actor’s conduct and de- cision-making that the government neglected to raise. She may also respond with her own policy analysis showing that the government employee or agency could not have possibly considered any com- duct in question into discrete acts, it specifically must identify the also policy disaggregate considerations and and implications un- derpinning each discretionary act. The government may not simply single act in the relevant course of conduct was either not violative of a statutory or regulatory directive or not grounded in policy con- siderations, then the court must rule in favor of the plaintiff. (ruling against the government because its declaration in the record speaks only to only speaks record the in declaration its because government the against (ruling the actor’s consideration of concerns). budget, and not budget weighed against option of acknowledging that any number of policy issues safety action at issue in its cause of action, but that, in fact, none of impact on them the decision did of the have government official any involved. After the Second Circuit far more discriminating approach . . conduct—andof course agency’s the of prongs two the apply then . . [C]ourts should disaggregate . . . the inquiry is not on the actor’s subjective intent.”). While evidence of the actor’s subjective intent to actually weigh pol- icies is not required, 2018] tion would fail quiry.” the DISCRETIONARY FUNCTION EXCEPTION court’s “particularized and fact-specific in- 319 \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 45 22-MAY-18 12:55 granting statute or regulation, then the plaintiff may rebut the pre- supporting an argument that each act could have potentially been informed by such policy balancing and consideration. supporting an argument beyond a “bald incantation of ‘policy.’” tion is taken away and the plaintiff must demonstrate could not that possibly policy have affected considerations the decision . . . .” 40268-nys_73-2 Sheet No. 85 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 85 40268-nys_73-2 40268-nys_73-2 Sheet No. 85 Side B 05/23/2018 07:56:14 245 Id. Contra On the other the On 244 illustrates, courts can use the burden of note 140, at 2932. “In theory, it should not Prescott As a result, if the court as a fact-finder supra 243 242 note 156, at 11 (“[B]urden of proof in this sense functions note 140, at 2899 (“Courts should not make credibility deter- , 516 F.3d at 1130 (“[W]e do not quickly accept that every note 153 and accompanying text explaining that the Court in supra In presenting her evidence and argument, the supra 241 Colella & Bain, St. Mary’s Honor Ctr. v. Hicks, 509 U.S. 502, 511 (1993) (holding in Lee, Miller v. United States, 163 F.3d 591, 594 (9th Cir. 1998). See See Terbush See See See did not discuss what kind of showing by the plaintiff could rebut the But see supra Once the parties have completed producing, sharing, formu- 245. 241. 242. 243. 244. Colella & Bain, proof as a procedural tool for granting or denying dispositive motions . . . .” court must keep in mind at all times that the government bears the “risk of non-persuasion.” lating, and arguing the evidentiary record, the court must make its decision on the motion. As a Rule 12 make all reasonable conversion, inferences in favor of the plaintiff. Further, the the court must plaintiff at all times bears the ultimate burden of persuasion for the issue). minations when deciding whether production.”). the United States has met its matter burden where the of burden of persuasion lies weightier evidence because should the prevail party under that a submits preponderance the dard. of In practice, however, the the burden of proof evidence in the discretionary stan- function con- text is vitally important, because, as Gaubert presumption. as a tiebreaker . . . aptly referred to as the ‘risk of nonpersuastion.’”). an employment discrimination case that a court’s rejection of a defendant’s prof- fered evidence does not compel a ruling in favor of the plaintiff only because the 320 sumption that the actor’s conduct furthered those same policy con- NYUsiderations. ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:275 \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 46 22-MAY-18 12:55 concludes that the evidence offered by the government is not credi- plaintiff. the of favor in rule to bound is it then ble, plaintiff’s plaintiff’s goal is simply to establish that there are genuine issues of material fact as to whether the DFE applies to any one of the ernment’s gov- discrete acts. minute aspect of the NPS’s work is touched by the policy concerns of the Organic Act.”). hand, if the government’s proffered evidence would compel a court a compel would evidence proffered government’s the if hand, to apply the DFE under the controlling legal principles, court must then weigh it the against the proof the plaintiff produced. If the finds and proof plaintiff’s the by compelled equally or more is court that there are genuine issues of material fact, then the government has not met its burden. The court is required to rule in favor of the plaintiff, deny the motion, and proceed to the next stage of trial. 40268-nys_73-2 Sheet No. 85 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 85 40268-nys_73-2 40268-nys_73-2 Sheet No. 86 Side A 05/23/2018 07:56:14 246 247 248 , Congress included the DFE in the VII. CONCLUSION note 4, at 1569–70. Varig Airlines supra : Congress made the policy determination that spreading the On the other hand, the DFE serves an important counter-bal- The DFE is crucial to the FTCA’s overall scheme, but it was not Congress enacted the FTCA because it recognized the dispro- 246. Dolan v. U.S. Postal Serv., 546 U.S. 481, 492 (2006) (quoting Kosak v. 247. Rayonier Inc. v. United States, 352 U.S. 248.315, 320 (1957). Levine, the injured party it harmed. Congress could, may and apparently did, leave decide that this him would be destitute unfair when the public as or a whole benefits from grievously the services performed by Government employees. Congress was aware that when losses caused by such negligence such by caused losses when that aware was Congress are charged against the spread among all public those who contribute treasury financially to the sup- they port of the Government and the are resulting burden on each tax- in effect payer is relatively slight. But when the entire burden falls on ancing function, limiting the United States’ and judicial interference with governmental policy-making. Accord- exposure to liability ing to the Court in statute to prevent judicial “second-guessing” of government deci- risk of harm caused by governmental misfeasance across all taxpay- ers is preferable to concentrating more, it the on statute serves a both single an victim. important deterrent forcing Further- the function government to by internalize the costs of its negligent ac- tions and a transparency function by alerting the public to the neg- ative externalities of such conduct. intended intended to overshadow the statute’s expansive waiver of sovereign immunity. The Supreme Court has bolstered this view when inter- preting the substantive scope of the §FTCA context 2680 . exceptions: . “[I]n . the unduly generous statute.” the of purpose central the defeating of risk the run tions interpretations of the excep- United States, 465 U.S. 848, 853 n.9 (1984)). because they undermine Congress’s policy goals, so too are “unduly generous” applications of the exception where the government has not met its burden of proof. portionate harm caused by the negligence that could befall private of citizens without judicial remedy because of government actors the doctrine of Rayonier sovereign immunity. The Court explained in 2018] DISCRETIONARY FUNCTION EXCEPTION 321 Just as “unduly generous interpretations” of the DFE are disfavored \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 47 22-MAY-18 12:55 40268-nys_73-2 Sheet No. 86 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 86 40268-nys_73-2 40268-nys_73-2 Sheet No. 86 Side B 05/23/2018 07:56:14 Still, 251 Suits Against Govern- 1, 1 (1963)). . EV the federal government, 254 . L. R note 136, at 482. supra note 76, at § 3658 n.11. ARV ., Exposing such functions to tort H supra 250 , 77 RIGHT ET AL W note 4, at 1569 (citations omitted). LAN note 10, at 1304 (citing Louis L. Jaffe, A supra While weighing the purposes underlying the DFE supra Assigning the burden of pleading and burden of proof HARLES 252 C 253 Article III courts are simply not well suited to determine 249 253. 14 249. United States v. S.A. Empresa de Viacao Aerea Rio Grandense (Varig 250. Niles, 251. Peterson & Van Der Weide, 252. Levine, 254. United States v. Kwai Fun Wong, 135 S. Ct. 1625, 1637 (2015). whether whether a certain, undefined category of functions is essential reasonable governmental or not. Airlines), 467 U.S. 797, 814 (1984) (quoting United States v. Muniz, 374 U.S. 150, 163 (1963)). ments and Officers: Sovereign Immunity for the DFE to the government comports with the bedrock princi- ples of the FTCA. Since “the FTCA treats the like United a commoner States than like more the Crown,” 322 sions that “would seriously handicap NYU efficient tions.” government ANNUAL opera- SURVEY OF AMERICAN LAW [Vol. 73:275 \\jciprod01\productn\N\NYS\73-2\NYS204.txt unknown Seq: 48 22-MAY-18 12:55 endeavor, the Supreme Court’s courts to effectuate consistent the broad remedial purpose instruction of the statute to sig- nals the priority of Congress’s waiver of immunity above competing lower concerns. against those underlying the FTCA in general is a difficult empirical difficult a is general in FTCA the underlying those against just like every other commoner tort defendant, must bear the bur- den of proof for affirmative defenses, including the DFE. Congress granted the government a statutory shield to protect essential dis- cretionary functions from being exposed to tort liability, but in or- der for the government to enjoy its benefits, it must do the work of pleading and proving the DFE’s applicability. liability could chill necessary decisive governmental action. scholars question the chilling effect of statutes such where the as taxpayers the rather than FTCA individual government actors pay judgments. 40268-nys_73-2 Sheet No. 86 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 86 40268-nys_73-2 40268-nys_73-2 Sheet No. 87 Side A 05/23/2018 07:56:14 R R R R R R R R R R R R R R R R R ...... 333 ...... 356 United States ...... 351 Riley v...... 341 ...... 357 ...... 350 ...... 331 ...... 349 323 to Drone Surveillance BETH SHANE* Riley ...... 344 ...... 354 TABLE OF CONTENTS ...... 324 ...... 336 ...... 353 ...... 358 ...... 338 ...... 329 OF DRONE REGULATION v. Jones the Special Needs Doctrine on Speech Fourth Amendment Constitutional Equilibrium Newsgathering by Drones the First System Content Neutral Restrictions California D. Exceptions to the Warrant Requirement Under A. From Property to Privacy: The Evolution of the B. Updating the Fourth Amendment to Preserve A. Mosaic Theory and GPS Tracking in B. Beyond the Secrecy Paradigm in C. Extending A. Background on the Drone Rule and B. The First Amendment C.Right to Record Preserving the Fourth Amendment by Protecting D. Forum Analysis of the National Airspace E. Alternative Channels of Communication and F. FAA Waiver Certificate Process as Prior Restraint Age ...... 346 System FOURTH FOURTH AMENDMENT DIMENSIONS I. Introduction * J.D., 2018, New York University School of Law; Ph.D., University of Iowa, V. Conclusion II. First Amendment Rights in the National Airspace IV. Mosaic Theory and Drone Surveillance III. Reasonable Expectations of Privacy in the Digital AFTER AFTER “KNOWING EXPOSURE”: FIRST AND B.A. New York University. Special thanks to Brett Max Skinner-Thompson, Kaufman, Professor Professor Scott Katherine Strandburg, Deirdre N.Y.U. Sullivan, Annual and Survey of the American Law.family for all of I their support. am also grateful to my partner and \\jciprod01\productn\N\NYS\73-2\NYS205.txt unknown Seq: 1 23-MAY-18 7:38 40268-nys_73-2 Sheet No. 87 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 87 40268-nys_73-2 40268-nys_73-2 Sheet No. 87 Side B 05/23/2018 07:56:14 2 LOOM- Most B 4 , Sheriff’s Secret Air Surveil- (April 23, 2014), http://www.latimes (Jan. 6, 2017), http://www.rollingstone I. IMES TONE Eyes Over Baltimore: How Police Use Military Tech- S McNutt delivered a system of synchro- LA T 1 , INTRODUCTION OLLING R , Secret Cameras Record Baltimore’s Every Move from Above (Aug. 23, 2016), https://www.bloomberg.com/features/2016- Benjamin Powers, Right now, most of Baltimore is continuously surveilled by Id. Id. Id. See also , Angel Jennings, Richard Winton & James Rainey, USINESSWEEK 3 In 2006, the Pentagon asked Ross McNutt, an astronautical en- B 1. Monte Reel, 2. 3. 4. gineer and founder of the Air Force’s Development, Center to for create Rapid a surveillance Product system to persons help identify planting the improvised explosive of tens killing and wounding from them prevent to Iraq in roadways devices (IED) along thousands the of U.S. military. nology to Secretly Track You This technology has since been adapted for ment commercial and is now used by local law enforcement in several American develop- cities. 324 NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:323 \\jciprod01\productn\N\NYS\73-2\NYS205.txt unknown Seq: 2 23-MAY-18 7:38 BERG tom of a plane, could produce a searchable photographic map of a large area, enabling the government from the to moment of the explosion. Angel Fire move allowed the military backward in time to navigate digitally stored images, tracing the movements of an en- emy combatant from the site of the IED back to their front door. Cessna planes equipped with Angel Fire’s progeny, conveying real- time images to analysts on the ground from a distance of 8,500 feet. Surveillance was conducted in Baltimore and Compton without warrant a and, at least spawning public protest and initially, well-founded privacy concerns. without the public’s knowledge, nized cameras dubbed “Angel Fire” that when attached to the bot- .com/local/lanow/la-me-ln-sheriffs-surveillance-compton-outrage-20140423-story .html (“Compton residents didn’t learn about the test Nutt’s company flights until a conducted year by after the Mc- fact.”). baltimore-secret-surveillance [https://perma.cc/M97S-HVTF]. .com/culture/features/how-baltimore-police-use-military-technology-to-track-you- w458136 [https://perma.cc/TH97-2M8M] (“The city of Baltimore has, ways, in become many ground zero for the military surveillance making technology its that way is from slowly the battlefields into the hands of police the departments country.”). across Similar warrantless aerial surveillance has occurred See, e.g. in Compton. lance of Compton Sparks Outrage people likely realize they enjoy less privacy from government obser- vation in public than when they are in their homes. And yet, most people would probably not expect that this means the government has the right to indefinitely record in high-resolution and analyze any movement through public space of an entire level. city from cloud 40268-nys_73-2 Sheet No. 87 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 87 40268-nys_73-2 40268-nys_73-2 Sheet No. 88 Side A 05/23/2018 07:56:14 Id. And 5 Florida and 10 radically reformed Fourth Amend- searches and seizures.” . Historically, the Fourth Amendment Katz California v. Ciraolo Id to Katz unreasonable (e.g., the telephone company or bank) or 8 in which the Supreme Court held that the 6 From 9 . amend. IV (emphasis added). And here is the problem: according to the current doc- current the to according problem: the is here And ONST 7 C , 389 U.S. at 351 (finding that “what a person knowingly exposes to the the Court has defined the scope of a person’s reasonable Smith v. Maryland, 442 U.S. 735, 743–44 (1979) (finding that the “in- at 360 (Harlan, J. concurring). 11 Id. See Katz The The Baltimore surveillance program illustrates the radical in- 5. U.S. 6. 389 U.S. 347 (1967). 7. 8. 9. 10. 476 U.S. 207, 214–15 (1986) (holding that no warrant was required to 11. 488 U.S. 445, 454 (1989) (O’Connor, J., concurring). “the right of the people to be secure in their persons, pers, houses, and pa- effects, against adequacy adequacy of traditional Fourth pro- constitutional core preserving for paradigm secrecy the around Amendment doctrine developed tections in the digital age. Deploying military surveillance Baltimore against residents not only alienates law enforcement citizens the police are sworn to from serve and protect; by sacrificing pri- the vacy and the Fourth Amendment at the altar of security, warrantless drone surveillance inhibits the exercise of First Amendment rights to speak and associate freely. The Fourth Amendment promises trine, an expectation of privacy is reasonable only to the extent that the information searched has posed” to not a third party already been “knowingly ex- 2018] DRONE REGULATION 325 \\jciprod01\productn\N\NYS\73-2\NYS205.txt unknown Seq: 3 23-MAY-18 7:38 Fourth Amendment warrant requirement is only triggered when a government search violates an individual’s “reasonable expectation privacy.” of the public at large. v. Riley, ment doctrine—shifting constitutional protection from its rights to the notoriously unwieldy “reasonable expectation of privacy” standard. mooring in property In holding that “the Fourth Amendment protects people, not places,” Justice Stew- art redefined the scope of Fourth Amendment protection to invalidate a warrant- less wiretap of a public telephone booth. yet, under the current doctrine, yearlong surveillance of an entire city without probable cause and without a warrant does not necessa- rily violate the constitution. This counterintuitive result is the con- sequence of a series of Fourth Amendment Katz cases v. beginning United with States, warrant requirement was triggered only by government mon searches law trespass. involving com- stitute a Fourth expectation Amendment of privacy in information “search” he voluntarily turns over to because third parties”). a “person has no legitimate stallation and use of a pen register” to record a person’s call history does not con- public, even in his own home or protection”). office, is not a subject of Fourth Amendment conduct aerial surveillance of the backyard of a house from a fixed-wing aircraft at 1000 feet, notwithstanding the fact that the yard was within traditionally protected curtilage of the home and that a fence shielded the yard from street observation). 40268-nys_73-2 Sheet No. 88 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 88 40268-nys_73-2 40268-nys_73-2 Sheet No. 88 Side B 05/23/2018 07:56:14 ’s 14 doc- Riley If the Compare United short-term Katz 13 with 824 F.3d 421 State v. Earls, 70 and aff’d en banc 12 15 (stating that the “relevant inquiry” to determine whether a party , then the advent of drone technology and incorporation of See id. Drones portend a dramatic expansion of surveillance technol- But since the advent of digital technology, individuals know- 13. Some lower courts have resisted this plausible extension of the 14. FAA Modernization and Reform Act, 49 U.S.C. 15.§ 40101 (2012). FAA Operation and Certification of Small Unmanned Aircraft Systems, 81 12. Katz expectation of privacy from aerial observation was not one that society is prepared to recognize as ‘reasonable.’”). trine with regard to tracking geolocation data produced United States by v. Graham, cellphones. 796 F.3d 332 (4th Cir. 2015) ( quisition of information by private firms and individuals, as well as for the government. Commercial drones hold great promise for expectation of privacy in the intimate details of their lives. ogy. The spread of commercial drones has implications for the ac- ingly expose nearly all aspects of their lives to their cell phone and internet service providers. As a result, under ment secrecy paradigm, most the people no longer retain Fourth a reasonable Amend- (4th Cir. 2016) (finding objectively reasonable “cell phone users’ expectation privacy in of their long-term [cell site location information]”) A.3d 630, 644 (N.J. 2013) (holding that “police must obtain a warrant based on a requirement, warrant the to exception an for qualify or cause, probable of showing to obtain tracking information through the States v. Skinner, use 690 F.3d 772 (6th of Cir. 2012) (holding a that warrantless cell phone”) geolocation surveillance is constitutionally permissible). Fed. Reg. 42,063 (June 28, 2016) (to be codified at 14 C.F.R. pts. 101–91). has a reasonable expectation of privacy is the likelihood of a member of the gen- eral public occupying the same vantage search. Justice as O’Connor clarifies the that the government reasonableness of at the search the not depends time upon whether of the the government aircraft was permitted relevant airspace, by but whether law “the helicopter to was in traverse the public the airways at an alti- tude at which members of the public travel with sufficient regularity that promulgated a rule (UAS)—or incorporating in popular unmanned parlance, space drones—into System aircraft (NAS). the National systems Air- 326 expectation of privacy through a fact-based, probabilistic analysis of NYUthe likelihood ANNUAL of third party or public access to the pertinent infor- SURVEY OFmation. AMERICANIf the information LAWis not a strictly and cret, effectively the held government se- is not [Vol. 73:323 required to show probable obtain cause a warrant and to gain access. \\jciprod01\productn\N\NYS\73-2\NYS205.txt unknown Seq: 4 23-MAY-18 7:38 ubiquity of smart phones exploded the privacy boundaries erected by commercial drones into navigable airspace under Aviation Administration recent (FAA) regulations only renders Federal the task of untangling Fourth Amendment doctrine from patterns of individ- ual behavior more urgent. In June 2016, the FAA, acting thority delegated with under the FAA au- Modernization and Reform Act, 40268-nys_73-2 Sheet No. 88 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 88 40268-nys_73-2 40268-nys_73-2 Sheet No. 89 Side A 05/23/2018 07:56:14 O- 19 26, N.Y. ’ , May ( Texas, https://per 18 LATE ., R43965, D [ S , ERV S California fires: Almost ESEARCH Florida Is No Stranger to Hurri- . R Hurricane Harvey: The Devastation Oct. 13, 2017, 11:05 PM), http:// ONG II, C CNN ( mass-shootings in Florida and Ne- , 7 (2015) (“If secrecy remains the primary Sept. 10, 2017), https://www.nytimes.com/ 21 ( Aug. 28, 2017), https://www.nytimes.com/2017/ RIMER If You Fly a Drone, So Can the Police IMES HOMPSON ( : A P IMES N.Y. T M. T , From natural disasters to large-scale political 17 16 RIVACY N.Y. T , P ICHARD http://www.slate.com/articles/technology/future_tense/2016/ R and California, Niraj Chokshi & Maggie Astor, Audra D. S. Burch & Jess Bidgood, Madison Park, Steve Almasy & Jason Hanna, 20 RONES AND See, e.g., See, e.g., See, e.g., Hurricane Maria Updates: In Puerto Rico, the Storm ‘Destroyed Us See, e.g., See, e.g., D (Aug. 28, 2017), https://www.nytimes.com/2017/09/21/us/hurricane-ma- In the wake of the recent natural disasters in Florida, in disasters natural recent the of wake the In 16. Stephen E. Henderson, 21. 18. 20. 19. 17. IMES 2016, 7:31 AM), T MESTIC ria-puerto-rico.html [https://perma.cc/U6SP-36UZ] (“Puerto Rico remained the throes in of chaos and devastation Thursday as the remnants of Hurricane Maria continued to dump rain on the island—up to three feet in some areas.”). Puerto Rico, 2018] professional and citizen journalists, allowing the operator high to quality take images from a safe distance comparison with, for and example, obtaining for aerial footage by less helicop- expense in ter. But as more drones take flight, First Amendment rights will ar- protections. Amendment’s Fourth the against pitted become guably DRONE One REGULATION commentator makes the problem plain: “If you fly a drone, so can [the] police.” 327 \\jciprod01\productn\N\NYS\73-2\NYS205.txt unknown Seq: 5 23-MAY-18 7:38 model for the Fourth Amendment and privacy torts, individuals would have little protection from drone surveillance when their location and revealed activities to have the public.”). been rainfall topping 50 Texas stretching from the Houston area inches into Louisiana.”). in some areas, Harvey devastated a swath of 08/28/us/hurricane-harvey-texas.html [https://perma.cc/7ZKM-EQXK] (“With 2017/09/10/us/key-west-naples-florida.html 2017/09/10/us/key-west-naples-florida.html [https://perma.cc/5JT7-ETZY] (“Irma, which struck Florida’s coastline twice and then tore through the state with a fury, is anything but a run-of-the-mill hurricane. It was wider than the peninsula itself. There was hardly anywhere in the state to escape its blustery wrath.”). ing, throwing into relief Amendment protections have the become intertwined. In other words, extent to which following a purely fact-based, probabilistic analysis of reasonable ex- First and Fourth Amendment First more the that seem would it privacy, of pectations protection is afforded to professional and citizen journalists record- ing matters of public interest by drone, the less Fourth Amendment protection the individual can claim against government-controlled drone surveillance. protests, drones possess incredible potential to capture newsworthy events that have historically been beyond the scope of local report- www.cnn.com/2017/10/13/us/california-fires-updates/index.html 6,000 buildings destroyed, 36 people killed canes, but This Is Different and What Comes Next [https://perma.cc/E2SM-QGBB]. 05/under_the_fourth_amendment_if_you_fly_a_drone_so_can_police.html 40268-nys_73-2 Sheet No. 89 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 89 40268-nys_73-2 40268-nys_73-2 Sheet No. 89 Side B 05/23/2018 07:56:14 With- 22 (Apr. 25, 527, 554 OST L.J. P MORY E Hassan v. City of New UFFINGTON , 66 H , see also NYPD Defends Tactics over Mosque Hiding in Plain Sight: A Fourth Amendment Thirty-six people have been killed since the wildfires began (“ This Note proceeds in three parts: the first part examines the 22. Rachel Levinson-Waldman, ma.cc/Y8ZX-XYEY] communities: after the extent of the police lance was revealed, members of the target community reported that department’s surveil- they had stopped attending religious services, engaging in political discussions, and even contacting the police to report crime. 328 vada, and political protest around the country, NYUit is paramount preserve ANNUALto journalists’ and citizens’ SURVEYright to record public OF events us- ing AMERICANdrone technology. But preserving this legitimate public interest LAWin drone journalism should not diminish Fourth [Vol. Amendment 73:323 pro- tection against warrantless government intrusion by drone surveil- lance. In fact, if further, the First Fourth Amendment right Amendment to speak protections will likewise become and illusory. Consider the associate erode impact of New freely York Po- much lice Department surveillance on members of New York’s Muslim \\jciprod01\productn\N\NYS\73-2\NYS205.txt unknown Seq: 6 23-MAY-18 7:38 Sunday night, making this outbreak one of the deadliest in state history, according to the California Department of Forestry and Fire Protection.”). Framework for Analyzing Government Surveillance in Public 2012), http://www.huffingtonpost.com/2012/02/24/nypd-defends-tactics-over_n _1298997.html [https://perma.cc/TZL2-EEUS]); York, 804 F.3d 277, 285–88 (3d Cir. 2015). (2017) (citing Adam Goldman & Matt Apuzzo, Spying; Records Reveal New Details on Muslim Surveillance ond explores the Fourth creased popularity and prevalence of commercial drones; the third Amendment ramifications of applies the insights of the mosaic theory to in- develop a Fourth ment Amend- framework for drone surveillance. With respect to Amendment, the First I make two Amendment protects main the “right to arguments: record” and first, second, result, certain that, time, that place, as and manner restrictions a on drone the flight First may be constitutionally impermissible. The final part seeks to disen- tangle the implications of this First Amendment analysis from the scope of Fourth Amendment protections by developing an alterna- tive Fourth Amendment framework informed by mosaic theory. out protection against this type of prolonged surveillance, the au- tonomy interest at the core of threatened. It is therefore important to fashion a new framework to the First Amendment is critically analyze whether government action constitutes a search sufficiently invasive to trigger the warrant requirement that avoids the linkage of news-gathering rights with the scope of government surveillance discretion. First Amendment implications of commercial drone use; the sec- 40268-nys_73-2 Sheet No. 89 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 89 40268-nys_73-2 40268-nys_73-2 Sheet No. 90 Side A 05/23/2018 07:56:14 No- Public 25 205, 205 . EV In light of . R 23 T . C UP S Actual Expectations of Pri- Operation and Certifica- 26 , 2016 , incorporates commercial II. The final rule, 24 AIRSPACE SYSTEM FAA [http://perma.cc/EXM5-G5ZT]. Matthew B. Kugler & Lior Jacob Strahilevitz, See FIRST AMENDMENT RIGHTS IN THE NATIONAL Mosaic Mosaic theory’s basic insight is that, when the government In June 2016, the FAA reversed its former policy of prohibiting 23. 24. The former FAA regulation distinguished between public, civil, and hob- 25. Daylight Operation, 14 C.F.R. § 107.29 (2016); Visual Line of Sight Air- 26. Operation over Human Beings, 14 C.F.R. § 107.39 (2016). The White compiles compiles sufficient information to discern a pattern of behavior, the mosaic (the whole) is more revealing than individual the sum of its parts (each discrete piece of information obtained). 2018] DRONE REGULATION 329 \\jciprod01\productn\N\NYS\73-2\NYS205.txt unknown Seq: 7 23-MAY-18 7:38 commercial entities from operating drones in the NAS, and offer- ing only a few time-bound and closely monitored exceptions made for certain public operators. put that information in the context of a broader pattern, a mosaic). byist UAV operations; public operations, including law agencies enforcement and institutions, and may apply public for a Certificate of Authorization permitting flight of an approved UAV “for a particular purpose, in a Operations particular (Governmental) area.” craft Operation, 14 C.F.R. § 107.31 (2016). House recently issued an executive order encouraging the further expansion of (2016) (the government can learn more from a given slice of information if it can lized surveillance in a discrete context which demands heightened security. This should be the case even when the First Amendment might protect journalists’ acquisition of the same information. this insight from mosaic theory and the highly investigative techniques invasive using drones nature coupled of with other sense-en- hancing technology, I argue that any targeted use of drones by law enforcement should trigger the warrant Fourth Amendment with requirement a small exception under for short-term, genera- the tably, the regulation also prohibits overhead flight above “persons not directly participating in the operation.” ulation adds Part 107 to Title 14 tions, of the regulating Code “Aeronautics of Federal and Regula- Space” access and to the radically sky. Under the expands new rule, “routine civil operation” small UAS—underof fifty-five pounds—is permissible during daylight the of (VLOS) sight of line visual the within remain must and hours remote pilot in command and the person operating the flight con- trols or, alternatively, within the VLOS of the visual observer. vacy, Fourth Amendment Doctrine, and the Mosaic Theory tion of Small Unmanned Aircraft (non-hobbyist and non-recreational) drones into the NAS. The reg- Systems 40268-nys_73-2 Sheet No. 90 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 90 40268-nys_73-2 40268-nys_73-2 Sheet No. 90 Side B 05/23/2018 07:56:14 30 Ferguson No- (Nov. 3, 2014), http://bigstory.ap.org/ RESS P Up in the Air: The Free-Speech Problems Raised by Regu- by Raised Problems Free-Speech The Air: the in Up But even further, as the ACLU argues, the 29 SSOCIATED A , Substantial evidence obtained by the Associated (Nov. 25, 2014, 11:56 AM), http://www.slate.com/articles/ 27 LATE S (“Aerial newsgathering provides a unique and important perspective Letter from ACLU Legal Dep’t to Reggie Govan, Chief Counsel, FAA Margot E. Kaminski, E. Margot By frustrating the free circulation of information regarding See See Id. Id. Id. 31 In a letter to the FAA protesting the no-fly order, the These These FAA restrictions on commercial drone flight implicate 28 28. 27. 29. 30. 31. the First Amendment. Consider, for example, the FAA prohibition on overhead flight above Ferguson, Missouri, in the wake of public protests following the shooting Michael of Brown. an unarmed black teenager, technology/future_tense/2014/11/faa_s_attempts_to_regulate_drones_could_ have_first_amendment_problems.html [https://perma.cc/JBW8-6GQ3]. drone use in certain respects in an effort to “keep pace with the advancement UAS of technology.” Exec. Order No. https://www.gpo.gov/fdsys/pkg/FR-2017-10-30/pdf/2017-23746.pdf 50,301, [https://per 82 Fed. Reg. 208 ma.cc/5EV5-NGDK]. (Oct. 30, 2017), By declaring a no-fly zone over Ferguson, the FAA not only violated the First Amendment right to record, Amendment protections it of protestors on the ground. The also FAA was jeopardized Fourth complicit in “obscuring potentially unconstitutional tices involving use of force and detentions” by preventing press cov- police prac- erage. 330 NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:323 \\jciprod01\productn\N\NYS\73-2\NYS205.txt unknown Seq: 8 23-MAY-18 7:38 Press and other public documents, indicates that date the was no-fly enacted in man- order to suppress media coverage of test. the pro- group of citizens and local law enforcement—the restriction tram- pled First Amendment rights and threatened Fourth Amendment protection of citizens involved in political protest. a matter of public concern of the highest magnitude—the relation- ship between citizens and members of a historically disenfranchised newsgathering allows the press to obtain coverage of an otherwise inaccessible situation. American Civil Liberties Union (ACLU) emphasized that aerial article/674886091e344ffa95e92eb482e02be1/ap-exclusiveferguson-no-fly-zone- aimed-media [https://perma.cc/V835-N6EZ]). First Amendment requires the press be permitted access to the air- space, particularly in the face of “extensive evidence of racial profil- ing, excessive use of force, and an overly militarized police force.” media-ferguson [https://perma.cc/JBW8-6GQ3] (citing Jack Gillum, Fly Zone Aimed at Media (Nov. 4, 2014), https://www.aclu.org/other/aclu-letter-faa-protesting-no-fly-zone- lating Drones, on breaking news, allowing for coverage that obtain on would the ground.”). otherwise be impossible to 40268-nys_73-2 Sheet No. 90 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 90 40268-nys_73-2 40268-nys_73-2 Sheet No. 91 Side A 05/23/2018 07:56:14 34 OX F Regu- , . 49, 84 EV (Sept. 27, . Employment EV L. R R Media groups ARY 32 . & M M OURNALISM W 33 . J First Amendment in the Sky , 57 OLUM C , note 15, at 42,193. supra https://ontheradar.foxrothschild.com/2016/07/articles/ Mark J. Connot & Jason Zummo, L.L.P., L.L.P., see also The substantial and wide-ranging response by news media to The The FAA policy reversal represented in recent drone regula- 33. For example, Marc Blitz describes possible opposition to the FAA visual 32. The FAA received many comments during the notice and comment pe- 34. It is becoming clear that print journalism has not just moved to digital A. Background on the Drone Rule and Newsgathering by Drones OTHSCHILD (2015); line of sight requirement which “might prevent journalists or other drone opera- tors from gathering information of public interest that can be obtained only by a al., et Blitz Jonathan Marc location.” operations the from far operating drone lating Drones Under the First and Fourth Amendments the rule promulgation reflects the stakes involved. In widely light documented, of sharp the decline of the newspaper industry, the cost-effective and groundbreaking potential of may offer drone struggling journalism news media a lifeline at a critical juncture. tion tion is, at least in part, a response news media to interest groups similar that allegations the near made total prohibition by of civil- ian use of drones, without Amendment rights of regard newsgathering organizations. to purpose, violated the First and Economics and Techfreedom urging the FAA to ment consider implications of the any restrictions First on drone Amend- access to the NAS. FAA Small Un- manned Aircraft Systems, riod from news media organizations including The Student Press Law Center, The News Media Coalition, The National American Society of Association Media Photographers, and of the International Center Broadcasters, for Law Google, the R 2018] DRONE REGULATION 331 \\jciprod01\productn\N\NYS\73-2\NYS205.txt unknown Seq: 9 23-MAY-18 7:38 drone qualifies as speech under the First Amendment the constitutionality of the regulation remains ambiguous). platforms, but the industry as a whole has realized a sharp reduction. As Alex Wil- liams reports, the numbers of “journalists than at tripled in the past digital decade” but this growth native “pales in comparison to publishers the num- has more ber of journalists laid off in the newspaper industry.” Alex T. Williams, Picture Darkens for Journalists at Digital Outlets drone-privacy/first-amendment-in-the-sky-drones-part-107-and-free-speech drone-privacy/first-amendment-in-the-sky-drones-part-107-and-free-speech [https:/ /perma.cc/8RGB-B6FH], https://ontheradar.foxrothschild.com/2016/08/arti- cles/drone-privacy/first-amendment-in-the-sky-drones-part-107-and-free-speech- part-ii-unto-the-breach [https://perma.cc/A6ER-BPNG] (noting that until the is- sue of whether U.S. airspace is a public or non public forum and whether flying a 2016), http://www.cjr.org/business_of_news/journalism_jobs_digital_decline.php ?four#four [https://perma.cc/ZQL5-5X7Q]. (TOD), overhead flight, and VLOS restrictions that may newsgathering frustrate under certain circumstances. will likely continue to exercise the right to access airspace permit- ted under the FAA regulation; it also requires no real stretch of the imagination to predict Amendment that litigation these over groups will the engage constitutionality in of First time-of-day 40268-nys_73-2 Sheet No. 91 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 91 40268-nys_73-2 40268-nys_73-2 Sheet No. 91 Side B 05/23/2018 07:56:14 , Amici News media or- 37 The FAA alleged Pirker 1, 1 (2014). 36 argued that, by failing to AW Huerta v. Pirker: FAA’s Regulation of L Amici urged the FAA to incorporate PACE & S Amici IR A 39 , 27 These tensions came to the forefront in 2011, when 35 38 Brief for News Media as Amici Curiae Supporting Respondent at 2–3, at 5–6. See Id. In the main, the News Media 37. Administrator’s Appeal Brief at 1–2, Huerta v. Pirker, NTSB Order No. 38. 35. E. Tazewell Ellett & William L. Elder, 36. The Code of Federal Regulations prohibits “careless or reckless opera- 39. manner so as to endanger the life or property Operation,of another.” Careless 14 or C.F.R.Reckless § 91.13 (2017). EA-5730 (Nov. 18, 2014) ments/Administrator%27sAppealBrief.pdf [https://perma.cc/5FK4-N77Z]. (No. CP-217), https://www.ntsb.gov/legal/alj/Docu- Innovative Technology on Trial tion,” maintaining “no person may operate an aircraft in a careless or reckless guidelines and instead initiated its first direct enforcement action against Raphael Pirker. Levying a $10,000 claimed Pirker civil had violated penalty, 14 C.F.R. the § FAA 91.13 by craft in operating a “careless and an reckless manner.” air- 332 The long road to FAA incorporation of commercial drones into the NYU airspace ANNUAL proceeded SURVEY in the OF decade prior through AMERICANa patchwork approach of to policy statements and ad hoc en- the LAW 2016 rulemaking forcement. Tensions mounted in the private sector as the FAA con- [Vol. 73:323 tinually pursued commercial entities, a while granting waivers to policy government operations. drone of withholding the FAA strayed from its permission enforcement habit of issuing desist” “cease notices from and to commercial operators in violation of FAA policy \\jciprod01\productn\N\NYS\73-2\NYS205.txt unknown Seq: 10 23-MAY-18 7:38 Company. ganizations seized the opportunity to weigh unconstitutionality of the in FAA ban on commercial drone on use, both the perceived as applied to Pirker and more broadly. Filing as News Media the group of newspaper and magazine publishers, as such players, industry major included companies, television cable broadcast and the Associated Press, Hearst Corporation, and the New York Times distinguish between “‘businessbetween distinguish tech- UAS of use the and operations’ nology for the First Amendment-protected purpose and disseminating of news and gathering information,” the FAA policy “has an impermissible chilling effect on the First Amendment newsgather- ing rights of journalists.” drones operated for newsgathering purposes into the airspace as was operating a drone for commercial purposes on and around the University of Virginia campus, sometimes within several feet of vari- ous buildings and above pedestrians on campus. Huerta v. Pirker, NTSB Order No. EA-5730 (Nov. 18, 2014) (No.CP-217), https:// app.ntsb.gov/legal/pirker/AmicusBriefNewsMedia.pdf [http://perma.cc/QC2V- ZQQQ]. 40268-nys_73-2 Sheet No. 91 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 91 40268-nys_73-2 40268-nys_73-2 Sheet No. 92 Side A 05/23/2018 07:56:14 . 41 ECH ban The . (May . EUTERS 43 R EV . & T R CI de facto , Cynthia D. Love, 46 B.U. J. S OURNALISM . J . , 21 see also OLUM C , note 38, at 14; note 38, at 6. Eye in the Sky the in Eye By regulating the NAS through the but as the heated legal discussions News from Above: First Amendment Implications of 45 44 supra supra Louise Roug, Louise pointed to the multiple ways drones could facilitate see also see B. The First Amendment Right to Record John Clarke, U.S. FAA, Virginia Drone Pilot Settle Lawsuit, at 12. Brief for News Media, Brief for News Media, Amici . at 13; at . Id. See See Id. See Id. Id Citing a study by the National Press Photographers Associa- case ultimately settled, Even news organizations with the means to obtain footage by 40 There are both strong policy and legal arguments for respect- 40. 44. 45. 46. 43. 41. 42. 42 22, 32 (2015) (“Helicopters rank among the most dangerous of transportation an. 23, 2015 10:06 AM), https://www.reuters.com/article/usa-drones-fine/u-s- L. ing a right to record heart, newsworthy events. Put the most simply: First terchange at of its ideas Amendment for the bringing encourages about of political the and social “unfettered in- tion, the accidents, fires, on report to ability their “improving newsgathering: weather conditions, natural disasters, and construction sites.” (J ter. 2018] “the public stands to benefit enormously from the news media’s use of UAS, as many news stories are best told from an aerial perspec- tive.” DRONE REGULATIONDrones might also provide otherwise inaccessible footage of large- scale protests, where “limited access and roadblocks” might prevent reporting by companies that lack the resources to deploy a helicop- 333 \\jciprod01\productn\N\NYS\73-2\NYS205.txt unknown Seq: 11 23-MAY-18 7:38 vehicles, recording a crash rate of 9.84 crash per rate 100,000 of hours, as all compared general to etc.), the aircraft which is approximately (e.g., thirty-five percent lower.”). airplanes, helicopters, balloons, blimps, helicopter stand to benefit, since drones often present a safer alter- native, posing less risk of accidents than news helicopters. faa-virginia-drone-pilot-settle-lawsuit-idUSL1N0V216620150123. issuance of policy guidelines and adjudication, the “federal govern- ment [was depriving] its citizens and a free and independent news media of the opportunity to participate in the rulemaking process required under U.S. law when the government restrict, seeks or to curtail otherwise regulate, proper lawful activity.” 1, 2014), http://www.cjr.org/cover_story/eye_in_the_sky.php [http://perma.cc/ QFZ7-H56S] (“[F]or the media, drones could be a game changer, with powers to fundamentally transform a journalist’s ability to tell stories.”). and heightened public interest surrounding the protracted adjudi- cation made clear, the FAA could no longer defend a on commercial use of drones. Pirker the Federal Aviation Administration Ban on Commercial Drones Sean T. Lawson, & Avery E. Holton, 40268-nys_73-2 Sheet No. 92 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 92 40268-nys_73-2 40268-nys_73-2 Sheet No. 92 Side B 05/23/2018 07:56:14 , a . 477, 478 EV . L. R Higginbotham Higginbotham A V 53 Privacy and the Right to In , 97 50 . providing an extended discussion of the The First Amendment should be Most recently, the Southern Dis- According to the complaint filed 47 49 Margot E. Kaminski, 51 Police then ordered Higginbotham to see also 52 note 27, at 189 (“The First Amendment protects not supra . 167, 180 (2017) ( , 105 F. Supp. 3d at 379. Participatory Democracy and Free Speech EV 48 Higginbotham v. City of New York Kaminski, Higginbotham v. City of New York, 105 F. Supp. 3d 369, 379 (S.D.N.Y. at 372. B.U. L. R See See Higginbotham Id. Id. Id. , 97 The Supreme Court has yet to consider whether the First 47. Roth v. United States, 354 U.S. 476, 484 (1957) (describing the scope of 48. 49. 50. 51. 52. 53. interest, including publicly performed police activity, tionally protected is and constitu- may be subjected only to place, and reasonable manner time, restrictions. Amendment Amendment protects the right to record and how far the right, if it exists, extends. However, a clear trend is and emerging district court at levels the that circuit the right to record matters of public First Amendment protection); Record 334 changes desired by the people.” NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:323 \\jciprod01\productn\N\NYS\73-2\NYS205.txt unknown Seq: 12 23-MAY-18 7:38 First Amendment right to record under three distinct theories: “(1) protection for the market place of ideas; (2) protection of speech necessary for democratic self- governance; and (3) protection of the individual autonomy (citing interest Robert Post, in speech”) regarded regarded as protecting the commercial use of drones for informa- tion gathering, particularly where information is newsworthy where the and drone operation presents no risk to public safety or na- tional security. by the plaintiff journalist, Douglas Higginbotham, he had climbed “onto the top of a telephone booth” in order to “get a tage better point” van- of “an arrest that resulted in a significant injury to the person being arrested.” freelance journalist was arrested for were violently arresting an Occupy Wall Street protestor filming at Zuccotti police officers who Park in downtown Manhattan. dant police officers] pulled his legs out from under him to drop his camera and fall him, onto the ground.” causing climb down from the booth. As he did, “three individual [defen- trict of New York (S.D.N.Y.) recognized a First Amendment “right to record” in (2011)). (1980) (Brennan, J., concurring). only speech, but also ‘the indispensable tion.’”) conditions of (citing meaningful Richmond communica- Newspapers, Inc. v. Virginia, 448 U.S. 555, 587–88 2015) (“All of the circuit courts that have [considered whether a police right activity exists] to have concluded record that the First Amendment protects the right to record police officers performing their duties in a public space, subject to rea- sonable time, place and manner restrictions.”). 40268-nys_73-2 Sheet No. 92 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 92 40268-nys_73-2 40268-nys_73-2 Sheet No. 93 Side A 05/23/2018 07:56:14 54 . 335, 381–86 EV . L. R A U. P , 159 On the narrower issue of 55 Pervasive Image Capture and the First , No. 3:14-cv-00196 (VLB), 2015 U.S. Rivera v. Foley 58 at 380 (citing Terebesi v. Torreso, 764 F.3d 217, 231 (2d Cir. at 378 (quoting Seth F. Kreimer, at 378. at 379. Significantly, the district court denied the existence of a Id. Id. Id. Id. 57 Rejecting the defendants’ claim to qualified immunity on the In ruling for Higginbotham, the district court held that the 56 54. 56. 55. 57. 58. In finding no evidence of a circuit split the court declined to follow Mesa First Amendment extends to filming newsworthy events as an sential “es- step toward an expressive activity, at least when performed to recording, of time the at intends, who journalist professional a by disseminate the product of his work.” of qualified immunity at issue in those specific cases, but also con- ceding that the First Amendment may protect public filming concern. matters of circuit split on the right to record, Circuit cases previously construing cited as evidence of the split to Third hold merely and Fourth that the right to record was not clearly established for the purposes 2018] claimed that the police officers arrested him in retaliation for film- ing the “violent arrest” in violation of his First Amendment rights. DRONE REGULATION 335 \\jciprod01\productn\N\NYS\73-2\NYS205.txt unknown Seq: 13 23-MAY-18 7:38 ceive First Amendment protection as when they are ‘expressive’), it a is difficult to see why that protection general matter (at should disappear simply because least their subject is public police activ- ity.” whether the right to record extends to police activity, the court de- termined that, “[i]f one accepts that photographing and filming re- grounds that the right was not “clearly established” at the the time arrest, of the court explained that “[w]hen neither the Supreme Court nor the Second Circuit has decided an nonetheless treat the law issue, as clearly established if decisions from a . . . court ‘may other circuits ‘clearly foreshadow sue.’” a particular ruling on the is- (2011)). Amendment: Memory, Discourse, and the Right to Record (S.D.N.Y. Jan. 3, 2013) (“[T]he right to record police activities on public property was not clearly established in this circuit at the time of the alleged conduct.”) (cit- ing as evidence of a circuit split, Kelly v. Borough of Carlisle, 622 F.3d 248 (3d Cir. 2010) and Szymecki v. Houck, 353 F. App’x 852 (4th Cir. 2009)). The S.D.N.Y. also diverges from the finding in Dist. LEXIS 35639, at *24 (D. Conn. Mar. 23, 2015) (“The Circuit, First Eleventh Circuit, Seventh Circuit, and Ninth Circuit all ment recognize protects the that photography and the recording of First police officers Amend- engaged in their official duties. The Third approach.”). Circuit and the Fourth Circuit take the contrary 2014) (quoting Scott v. Fischer, 616 F.3d 100, 105 (2d Cir. 2010))). *72–76at 1097, LEXIS Dist. U.S. 2013 10464(JPO), Civ. 09 No. York, New of City v. 40268-nys_73-2 Sheet No. 93 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 93 40268-nys_73-2 40268-nys_73-2 Sheet No. 93 Side B 05/23/2018 07:56:14 OLI- P IGHT demon- 60 R , ITH 59 : W note 27, at 184. AMERAS supra , C , the ACLU defended the , 133 S. Ct. 651 (2012). ACLU v. Alvarez OUNTED -M Alvarez ODY cert. denied See also Kaminski B OLICE 2 (2015) (“Historically, there was no documentary , P case case highlights the tension between preserv- LL , an earlier case, A OR TANLEY F S IN AY The ACLU sought, and on appeal ultimately ob- J W , 61 A Aiming to promote police accountability and to deter , 62 Higginbotham Higginbotham at 1. LACE Id. See, e.g. C. Preserving the Fourth Amendment by Protecting the First P The Like 61. Memorandum in Support of Plaintiff’s Motion for a Preliminary Injunc- 62. 60. 679 F.3d 583 (7th Cir. 2012), 59. tion at 2, ACLU of Ill. v. Alvarez, No. 1:10-cv-05235 (N.D. Ill. Sept. 3, 2010) https:/ /www.aclu-il.org/sites/default/files/field_documents/memorandum_in_support_ of_plaintiffs_motion_for_a_preliminary_injunction.pdf [https://perma.cc/2RTM- 7JD8] (“[T]he Act provides: ‘A [k]nowingly and person intentionally commits uses an eavesdropping eavesdropping when device hearing or recording for all he or any part the of any conversation . . purpose . . unless of he . does so . . . . with the consent of all of the parties to such 2(a)(1)(A).”). conversation . . . .’ 720 ILCS 5/14- evidence of most encounters between police officers and the public, the and volatile due nature to of those encounters, this often resulted in accounts of incidents. radically Cameras have the potential divergent to be a win-win, helping protect the public against police misconduct, and at the same time helping protect police against false accusations of abuse.”). First Amendment right to monitor police activity in public against a state “eavesdropping” statute that “criminalizes the use of machines to record conversations, regardless of are whether the private.” conversations CIES IN tained, a preliminary injunction prohibiting the state from prose- cuting the program.” ACLU for implementing a police “monitoring 336 NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:323 \\jciprod01\productn\N\NYS\73-2\NYS205.txt unknown Seq: 14 23-MAY-18 7:38 police misconduct, the ACLU proposed systematic audio recording of police activity “without the consent of the officers, when: (1) the officers are performing their public duties; (2) the officers public are places; in (3) the officers are speaking at a volume audible to the unassisted human ear; and (4) the manner of recording is oth- strates the extent to which preserving the Fourth Amendment de- pends on protecting the First. In sion may inspire police to use unnecessary violence. ing public safety while protecting individual rights—the individual protecting often while same, safety public ing conflicting, interests at stake in the FAA regulation of commercial drones. The case should also serve as a reminder that the constitu- tional protections provided under the First Amendment sure protection may under en- the Fourth: the First record Amendment the right to police engaged in some assurance that police will not violate Fourth Amendment pro- their professional duties provides tections or use excessive force in situations where heightened ten- 40268-nys_73-2 Sheet No. 93 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 93 40268-nys_73-2 40268-nys_73-2 Sheet No. 94 Side A 05/23/2018 07:56:14 Dean 67 Even before the (Sept. 29, 2017, 10:41 66 Police Used Private Security Aircraft Security Private Used Police NTERCEPT I HE The government violates the T 69 , The court found that the First Amend- 64 65 (Oct. 25, 2016, 9:49 PM), https://www.theguardian.com/us- PM), 9:49 2016, 25, (Oct. Over 120 Arrested at North Dakota Pipeline Protests, Including Jour- The court ultimately upheld the preliminary in- 63 v. Alvarez, 679 F.3d at 586–87. UARDIAN at 5. at 595. G . Id. Id. Id ACLU Id. HE T Dedman denied that the drone ever presented a threat to the , The more recent mass arrests of protestors at Standing Rock, 63. 68. 69. 67. Sam Levin, 64. 65. 66. Speri, Alice & Parrish, Will Brown, Alleen 68 including journalists and filmmakers, amidst accusations of police brutality similarly demonstrate the extent to Fourth which Amendment the stand First and and fall together. protests followed Ferguson’s pattern: as tension between police and The Standing Rock flight a issued FAA the escalated, opponents pipeline Access Dakota ban preventing the media from using drones to without cover undergoing the events a further review process. news/2016/oct/25/north-dakota-oil-pipeline-protest-arrests-journalists-filmmakers [https://perma.cc/DR25-6GRP]. 2018] erwise lawful.” DRONE REGULATION 337 \\jciprod01\productn\N\NYS\73-2\NYS205.txt unknown Seq: 15 23-MAY-18 7:38 ing that “[t]he act of making an audio or audiovisual recording is necessarily included within the First the disseminate to right the of corollary a as rights press and speech Amendment’s guarantee of resulting recording.” ment provides broad protection of audio and visual recordings as expressive activity or the necessary prerequisite to speech, recogniz- officers or public safety and announced his plan to continue docu- menting the demonstration; Dedman has also contributed footage of the protest to Huffington Post. drone operators as part of a larger strategy “to create a media black- media a create “to strategy larger a of part as operators drone out,” making it easier to refute claims of excessive force. flight restriction was officially imposed, law enforcement targeted Dedman Jr., a member of the Standing Rock Hunkpapa tribe from South Dakota, was recording the protest by drone. the “drone came after Claiming us,” police officers shot that the drone out of the sky. junction junction against state prosecution, finding that an statute eavesdropping that would prohibit recording audible public speech by the police would likely “flunk” intermediate scrutiny for “restrict[ing] far more speech than necessary to protect legitimate privacy inter- ests . . . [and] likely violates the First Amendment’s free-speech and free-press guarantees.” AM), https://theintercept.com/2017/09/29/standing-rock-dakota-access-pipe- line-dapl-no-fly-zone-drones-tigerswan [https://perma.cc/LN2J-HS83]. nalists for Surveillance in Standing Rock No-Fly Zone 40268-nys_73-2 Sheet No. 94 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 94 40268-nys_73-2 40268-nys_73-2 Sheet No. 94 Side B 05/23/2018 07:56:14 70 This rule might man- If the airspace is catego- 71 72 note 38, at 10–14 (arguing that drone supra Preminger v. Principi, 422 F.3d 815, 823 (9th Cir. 2005) (“In , Frisby v. Schultz, 487 U.S. 474, 479 (1988) (“To ascertain what , Brief of News Media, , Letter from Anthony E. Rothert, Legal Dir., ACLU of Mo. Found. D. Forum Analysis of the National Airspace System see also See, e.g. See, e.g. See, e.g. The constitutionality of FAA restrictions on commercial drone If the First Amendment provides a right to record matters of 72. 70. 71. flight turns largely on whether the airspace occupied by drones is classified as a public or nonpublic forum. ized potential to facilitate better access to news events at a more reasonable cost” and facilitate the free flow of information). order to assess [a First Amendment free speech claim], we first must ‘identify the nature of the forum, because the extent to which the Government may limit access depends on whether the forum is public or nonpublic.’”)NAACP Legal Def. (quoting & Cornelius Educ. v. Fund, Inc., 473 U.S. 788, 797 (1985)). & Lee Rowland, Staff Attorney, ACLU, to Reggie Govan, Chief Counsel, FAA (Nov. Revenue, of Comm’r Minnesota v. Co. Tribune Star Minneapolis (quoting 2014) 4, 460 U.S. 575, 585 (1983) (“[D]ifferential treatment, unless justified by some spe- cial characteristic of the press, suggests that the goal of the regulation is not unre- lated to unconstitutional.”)). suppression of expression, and use restriction violates the First Amendment as drones such “have the currently-unreal- a goal is presumptively 338 heart of the First Amendment, liberty of the press, when it restricts NYU access ANNUAL to airspace SURVEY with the intent OF of suppressing Ferguson newsgathering. AMERICAN and Standing LAW Rock bear witness to dangers exclusively airspace of use drone reserving and media news banning inherent in [Vol. 73:323 for law enforcement. public concern, including but not limited to police conduct in pub- lic spaces, it follows that this right should technology apply used regardless to of obtain the the recording. \\jciprod01\productn\N\NYS\73-2\NYS205.txt unknown Seq: 16 23-MAY-18 7:38 date a distinction between given that automated automated and recording may manual sciously occur intending without recordings, anyone to con- capture a same logic dictates that newsworthy the First Amendment right extends to event. film- However, the ing using a handheld device as drone. well as to aerial photography by limits, if any, may be placed on protected speech, we ‘place’ have of often that focused speech, on considering the the nature of the forum employ.”); the speaker seeks to consider below—the restrictions on drone operation established by final rulemaking may not be sufficiently tailored to survive interme- diate scrutiny. Forum analysis typically begins by space categorizing into the one of three major categories: (1) public forum, (2) a rized as a public forum—as it should be, for reasons this note will 40268-nys_73-2 Sheet No. 94 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 94 40268-nys_73-2 40268-nys_73-2 Sheet No. 95 Side A 05/23/2018 07:56:14 The FAA 73 Center for Bio- The Ninth Cir- 77 note 15, at 42,193. supra Center for Bio-Ethical Reform, Property that has not been desig- 75 considered whether a Honolulu ordi- 79 , 455 F.3d at 915. Under the latter two versions of forum analysis, the 74 was properly classified as a nonpublic forum, the air- at 919–20. at 922. Therefore, because the ordinance’s prohibition against 78 However, even if the airspace considered in Ctr. for Bio-Ethical Reform Id. Id. 76 To argue that airspace is a non-public forum, the FAA has re- 73. Perry Educ. Ass’n v. Perry Local Educators’ Ass’n, 74. 460 U.S. 37, FAA Small Unmanned 45-47 Aircraft Systems, 75. 455 F.3d 910 (9th Cir. 2006). 76. Int’l Soc’y for Krishna Consciousness v. Lee, 505 U.S. 672, 77. 679 (1992). 78. 79. “preserving aesthetics and promoting safety”—the ordinance sur- (1983) (providing parameters for forum analysis). nance prohibiting aerial advertising, which restricted company involved in access “towing aerial banners over to the beaches,” vio- a lated the First Amendment right to free speech. Ethical Reform space coveted by commercial drone operators Center is for Bio-Ethical distinguishable. Reform 2018] designated public forum, or (3) a non-public forum. DRONE REGULATION 339 \\jciprod01\productn\N\NYS\73-2\NYS205.txt unknown Seq: 17 23-MAY-18 7:38 more speech than necessary to the furtherance of the government interest—to be constitutionally permissible. lied primarily on the Ninth Circuit case Honolulu. of County & City v. Inc. FAA restrictions must survive intermediate scrutiny—restricting no banner towing was viewpoint neutral “preserve the and property for reasonably the purpose to tailored which it to is dedicated”— vived constitutional review. nated as public by the government and is not a forum traditional public falls under the category of held nonpublic that forum. “limitations on Courts expressive have activity conducted on this last category of property must survive only view.” a much more limited re- maintains maintains that the restrictions on commercial drone use currently in place under Part 107 are constitutionally permissible under ther ei- of three available theories: (a) as “reasonable neutral” restrictions on access to a non-public forum; (b) as an inci- and viewpoint dental restriction on speech in a public forum; and, finally, (c) as content-neutral time, place, and manner restriction of speech in a public forum. cuit held that while “it is uncontested issue is that a the form of banner speech towing protected by at the First airspace Amendment,” at the issue was a nonpublic forum whose “principal purpose can hardly be characterized as ‘promoting ideas.’” the free exchange of 40268-nys_73-2 Sheet No. 95 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 95 40268-nys_73-2 40268-nys_73-2 Sheet No. 95 Side B 05/23/2018 07:56:14 ) 81 However, Id. Center Center for Bio- manned air- United States v. 83 note 15, at 42,066. The question then be- 85 supra is inapposite when consid- , the Court further clarified Center for Bio-Ethical Reform 82 The minimum safe altitude estab- 84 , 455 F.3d at 920. United States v. Kokinda Center for Bio-Ethical Reform In dismissed the argument that the spatial proximity of 80 Id. at 920 (citing920 at (finding (1983) 179 171, U.S. 461 Grace, v. States United Id. Ctr. for Bio-Ethical Reform for the general proposition that “spatial proximity to a public However, In upholding the ordinance, the Ninth Circuit in 80. 82. 81. United States v. Kokinda, 497 U.S. 720, 728–29 (1990) (holding that a 83. FAA Small Unmanned Aircraft Systems, 84. 14 C.F.R. § 91.119(b) (2017). 85. § 91.119(d). It should be noted that helicopters “may be operated at less should impact the forum analysis. The court cited sider not only the physical attributes of the space but its purpose. that the forum analysis of a space otherwise indistinguishable from a traditional public forum—there, a public sidewalk—should con- ering the airspace at issue in drone regulation because max- the limit regulations FAA Where distinct. is dispute in the airspace actual imum altitude of drones to 400 feet above ground, Ethical Ethical Reform airspace to traditional public forums—public parks and beaches— Grace forum is determinative only if the two areas are physically ‘indistin- guishable.’” maintain a minimum “sparsely altitude populated” of areas. 500 feet above ground over Following this logic, the Ninth Circuit found distinguishable” from the the airspace beaches “easily below, because “the airspace physically is separate from the ground or equipment beaches, and requires authorization special for access, been and a locus of has expressive activity.” never typically 340 NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:323 \\jciprod01\productn\N\NYS\73-2\NYS205.txt unknown Seq: 18 23-MAY-18 7:38 craft (the type of vehicle regulated in lished for manned flight over congested areas is significantly higher at “1000 feet above the highest obstacle.” comes whether the space 100 feet rum—for example, above a public a park—is meaningfully traditional distinguishable public fo- sidewalks leading to the United States Supreme Court building indistinguishable in both location and purpose from other public sidewalks and thus public fora)). United States Postal Service regulation prohibiting soliciting alms tions on postal premises, as applied to a sidewalk “constructed solely and to provide for contribu- the passage of individuals engaged in postal Amendment). business,” did not violate the First than the minimums prescribed in paragraph (b) or (c)” as long as the “operation is conducted without hazard to persons or property on the surface.” the point stands that under a certain altitude the airspace becomes above indistinguishable from a the forum public itself, whether forum the line is drawn at 100 or 400 feet. 40268-nys_73-2 Sheet No. 95 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 95 40268-nys_73-2 40268-nys_73-2 Sheet No. 96 Side A 05/23/2018 07:56:14 88 In 86 To find Perry Educ. 87 see also cannot be found dispositive . The regulation triggers intermediate 89 56 Content-Neutral Restrictions note 43, at at 57 (stating that content-neutral restrictions of the time, place, or supra Center for Bio-Ethical Reform , 487 U.S. at 480 (“[The Supreme Court] has repeatedly referred to E. Alternative Channels of Communication and In order to protect access, it is paramount that First Id. See id. Frisby 90 If the airspace regulated by the drone rule in fact constitutes a 87. Love, 88. 89. 90. First Nat’l Bank of Boston v. Bellotti, 435 U.S. 765, 783 (1978). 86. vive intermediate scrutiny. public forum and the First Amendment protects the right to record conduct directly related to the dissemination of newsworthy infor- mation, then restrictions on speech imposed by FAA rules must sur- sential public forums, activity.”). the government may not prohibit all communicative manner involving a public forum “must be ‘justified without reference to the con- tent of the regulated speech,’ be ‘narrowly tailored to serve a ment significant interest,’ govern- and ‘leave open ample alternative channels of communication’”) (quoting Clark v. Cmty. for Creative Non-Violence, 468 U.S. 288, 293 (1984)). public streets as the archetype of a traditional public forum.”); Ass’n v. Perry Local Educators’ Ass’n, 460 “streets U.S. and 37, parks 45 . (1983) . . (recognizing have that immemorially public and, time out of been mind, have been used for purposes held of assembly, communi- in trust for the use quintes- these In questions. public discussing and citizens, between thoughts cating of the At the very least, the manned airspace aircraft occupied are physically by distinguishable small and have drones tradition- ally and been by set aside for different holding purposes. in For these reasons, the for the purposes of categorizing the forum regulation by the FAA rulemaking. 2018]for the purposes of forum analysis from the public park itself. DRONE REGULATION 341 \\jciprod01\productn\N\NYS\73-2\NYS205.txt unknown Seq: 19 23-MAY-18 7:38 scrutiny regardless of whether the restriction incidentally or directly or incidentally restriction the whether of regardless scrutiny restrains expressive “the First activity. Amendment goes beyond protection of the press and the The self-expression of Court individuals to prohibit government from limiting has the recognized stock of information from that which members of draw.” the public may “News “News from Above: First Amendment Implications of the Aviation Administrative Ban on Commercial Drones,” Cynthia Federal Love argues that the “airspace occupied by small UAS above a public fo- rum should be considered as within the public forum.” otherwise would involve a “radical departure from established First Amendment jurisprudence,” allowing the government to “bar the use of banners, balloons, or tall signs, even in a public park, under the theory that the airspace above the park is a nonpublic forum.” 40268-nys_73-2 Sheet No. 96 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 96 40268-nys_73-2 40268-nys_73-2 Sheet No. 96 Side B 05/23/2018 07:56:14 There is 91 note 15, at 42,194. note 15 at 42,194. As technology reduces 96 supra supra As long as the “content-neutral regula- 94 The connection between means and ends, 95 However, because the rulemaking restricts 92 93 advance the government’s asserted interest “in assuring that in fact With regard to the first of these prongs—narrow tailoring to 93. Ward v. Rock Against Racism, 491 U.S. 781, 791 (1989) (quoting Clark v. 94. FAA Small Unmanned Aircraft Systems, 95. Hill v. Colorado, 530 U.S. 703, 726 (2000). 96. Turner Broad. Sys., Inc. v. FCC, 512 U.S. 622, 664 (1994) (holding that 91. Glik v. Cunniffe, 655 F.3d 78 (1st Cir. 2011) (finding a clearly-estab- 92. FAA Small Unmanned Aircraft Systems, the public has access to a multiplicity of purpose of information the sources highest order”). is a governmental serve a significant interest—the FAA asserts a “substantial interest in interest interest—the“substantial significant a a asserts serve FAA protecting the navigable airspace of the United States, in addition to people on the ground.” Cmty. for Creative Non-Violence, 468 U.S. 288, 293 (1984)). must carry provisions of the Cable Television Consumer Protection and Competi- tion act must lished First Amendment right to film Houchins v. police KQED, Inc., officers 438 U.S. 1, in 11 (1978)). a public space) (citing 342 Amendment protection be understood NYU to gather ANNUALnews ‘from any source extend by means within the law.’” SURVEY to “a OF right AMERICAN to LAW [Vol. 73:323 \\jciprod01\productn\N\NYS\73-2\NYS205.txt unknown Seq: 20 23-MAY-18 7:38 on non-expressive conduct that incidentally limits speech, the gov- ernment still must “demonstrate that the recited not merely conjectural, and harms that the regulation will are in fact alleviate real, these harms in a direct and material way.” however, requires an actual empirical basis. Whether a Part 107 re- striction is construed as directly restraining speech or as a restraint tion must be “narrowly tailored to serve a significant governmental interest” and communication.” “leave open ample alternative channels for (either directly or incidentally) expressive conduct protected under the First Amendment, to survive constitutional review the restric- tion does not entirely foreclose any means of communication,” the FAA’s rule “may conceivably satisfy the tailoring requirement even though it is not the least restrictive or least intrusive means of serv- ing the statutory goal.” the risks of flying beyond the line of sight, above crowds, or outside daylight hours, the government’s defense of Part 107 may well slide drones commercial of regulation The conjecture. into unacceptably requires a careful balance of safety and efficiency concerns, but reg- no real dispute regarding whether the FAA regulation is neutral: “the content- rule applies equally to all remote pilots of small UAS subject to FAA regulation, regardless of content,” and the tion regula- “is not being applied because of disagreement sage with the mes- presented.” 40268-nys_73-2 Sheet No. 96 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 96 40268-nys_73-2 40268-nys_73-2 Sheet No. 97 Side A 05/23/2018 07:56:14 As initial protes- 99 note 38, at 12. note 15, at 42,072. supra supra This reading of the constitu- 98 97 Ward v. Rock Against Racism, 491 U.S. 781, 791 (1989) (finding Brief for News Media as Amici Curiae, at 42,194. Bery v. City of New York, 97 F.3d 689 (2d Cir. 1996) (New York City’s See —natural disasters which cannot be visually captured while Id. Cf. see also 100 With regard to the second prong, “alternative channels of com- of channels “alternative prong, second the to regard With 97. FAA Small Unmanned Aircraft Systems, 98. 99. 100. munication,” munication,” the FAA construes “alternative channels” broadly, de- fending the regulation aircraft manned using videography and photography aerial conduct on the ground remains that unaffected by the this “capability rule.” to 2018] ulation through rulemaking leaves the agency fated to “lag behind” the rapidly evolving technology. DRONE REGULATION 343 \\jciprod01\productn\N\NYS\73-2\NYS205.txt unknown Seq: 21 23-MAY-18 7:38 for gathering the desired information available. worthy images, but, without recourse to drones as a practical mat- ter, certain events recording devices. Media companies will often lack the resources to are left conduct aerial beyond photography by manned aircraft; the the situation may simply reach be too dangerous of to deploy a news audiovisual helicopter, aircraft or may be manned too intrusive to render the news-gathering mission productive. In other words, the regulation has the real potential to shut down all avenues of communicating a particular story by mak- ing the expression of the same audiovisual elements that constitute the story impracticable or even impossible. If the availability of al- ternative channels of communication is measured by the speaker’s ability to convey the same speech and not then the merely FAA regulation does similar not always speech, leave alternative channels tional mandate construes there are “communication” still many ways besides drone loosely—of recording to capture news- course, adhering to VLOS restrictions, large public protests, or any that happens after event dark. It is indisputable that the FAA has a legiti- mate interest in preserving public safety and national security, but the FAA “cannot bar an entire category of expression to accomplish tations to the regulation by the News Media coalition make clear, cited the restrictions bar access above to certain types of news-gath- ering their First Amendment rights because it presents selling a visual de art facto for prohibition a against large majority of cense.); the artists who apply for the vending li- that the government speech may in a public forum impose provided that “they leave open reasonable ample alternative nels for communication of the information” and upholding the noise ordinance as chan- content-neutral restrictions on applied to performances in the Central Park band shell on the grounds that it had no impact on the quantity or quality of the expressive amplification). content impacted beyond requirement in the General Vendors Law that visual artists be licensed in order to sell their artwork in public spaces constitutes an unconstitutional infringement of 40268-nys_73-2 Sheet No. 97 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 97 40268-nys_73-2 40268-nys_73-2 Sheet No. 97 Side B 05/23/2018 07:56:14 and the rapid 103 note 15, at 42,072. supra The “certificate-of-waiver pro- “certificate-of-waiver The . However, the Supreme Court 102 Freedman v. Maryland Complaint at ¶ 5, Public Citizen v. Trump, No. 1:17-cv-00253, 2017 1:17-cv-00253, No. Trump, v. Citizen Public 5, ¶ at Complaint , 97 F.3d at 697. Exec. Order No. 13771, 89 Fed. Reg. 24582 (Jan. 30, 2017) (mandat- Bery See 101 see also see As a compromise between the conflicting goals of preserving By requiring a waiver before footage can be gathered by drone F. FAA Waiver Certificate Process as Prior Restraint on Speech 101. 102. FAA Small Unmanned Aircraft Systems, 103. pertinent rulemaking is complete.” is rulemaking pertinent public safety and allowing for efficient uses of new technology, the FAA designed a certificate waiver process as a “bridging mechanism for new and emerging technologies, allowing testing the and FAA use to of permit those technologies, as appropriate before the 344this accepted objective when more narrowly drawn regulations will NYUsuffice.” ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:323 \\jciprod01\productn\N\NYS\73-2\NYS205.txt unknown Seq: 22 23-MAY-18 7:38 reasonable content-neutral prior restraint on speech. crowd a over or line-of-sight, the beyond hours, non-daylight during of people, the FAA effectively requires a license or allowing speech permit to occur. before Content-neutral permit schemes like the proce- strict the to held been not have FAA the by promulgated one dural safeguards required for content-based licensing systems scribed de- under has required that time, place, and manner regulations “contain ad- evolution of drone technology, the certificate-waiver system raises First Amendment concerns. In order for stand intermediate the scrutiny, the regulation waiver process to itself with- must be rowly nar- tailored to the government objective to qualify as a cess” permits the FAA while conducted” “safely be still may operation drone small whether to make a case-by-case deviating from determination certain provisions under Part 107, including of line-of- sight, daylight, and overflight restrictions. By proceeding in this in- cremental fashion, the FAA has tried to tween industry strike demands and a safety compromise concerns of be- the highest order, but in light of recent executive action aimed at frustrating the pro- mulgation of new federal regulations generally ing “unless prohibited by law, whenever an executive department or agency pub- licly proposes for notice and comment or otherwise promulgates a new regulation, the words, other In repealed.” be to regulations existing two least at identify shall it Office of Management and Budget (OMB) might refuse to permit amending Part 107 any to issue new unless the FAA rule were to identify two unrelated rules to repeal.); WL 4508646 (D.D.C. Feb. 8, 2017) (“[T]o repeal two regulations for the purpose of adopting one new one, based solely on a directive to impose zero net costs and without any consideration of benefits, is arbitrary, capricious, an abuse of tion, discre- and not in accordance with law.”). 40268-nys_73-2 Sheet No. 97 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 97 40268-nys_73-2 40268-nys_73-2 Sheet No. 98 Side A 05/23/2018 07:56:14 . DMIN The A 108 , https://www . VIATION . A DMIN ED F A , Feb. 24, 2017), https:// 2017), 24, Feb. , Trump Intensifies His At- ( IMES VIATION . A ED N.Y. T N.Y. F , , Given the recent exclusion of 107 104 The FAA outlines certain “performance- 105 Part 107 Waivers Granted Thomas v. Chi. Park Dist., 534 U.S. 316, 322 (2002). . FAA Issues Part 107 Waivers, Airspace Authorizations Id Whether the guidelines prove sufficiently stringent to con- see also 106 To survive constitutional review, the FAA waiver-certificate pro- 105. Forsyth Cty. v. Nationalist Movement, 505 U.S. 123, 133 (1992) (holding 106. 104. Freedman v. Maryland, 380 U.S. 51, 58–59 (1965) (holding that to be 107. 108. Julie Hirschfeld Davis & Michael M. Grynbaum that county ordinance providing for the issuance of blies, permits and demonstrations, violated for the First parades, and Fourteenth Amendment assem- because it permitted the government administrator to determine how much to charge for the permit if standards). anything, at will, in the absence of any objective articulated gram must guard against the untrammeled exercise of administra- tive discretion by guidelines that do not appear to leave the providing decision “to the whim of reasonably the specific administrator.” and objective constitutionally permissible a licensing scheme regulating the exhibition tion of pictures mo- must place the “burden of expression” on the providing censor, promptly determine whether that or not the the license will be film is unprotected granted, and provide opportunity for prompt for judicial review of any permit de- nials); perma.cc/63LG-WNCQ]. (October 25, 2016), https://www.faa.gov/news/updates/?newsId=86707 [https:// 2018] equate standards to guide the official’s decision and render it sub- ject to judicial review.” DRONE REGULATIONbased standards” for waiver tions. under any of the Part 107 restric- 345 \\jciprod01\productn\N\NYS\73-2\NYS205.txt unknown Seq: 23 23-MAY-18 7:38 strain the exercise of administrative discretion remains to be seen; as of yet, most applications for waiver have been denied for “incor- rect or incomplete” information. tacks on Journalists and Condemns F.B.I. ‘Leakers’ F.B.I. Condemns and Journalists on tacks .faa.gov/uas/request_waiver/waivers_granted [https://perma.cc/E2FZ-JNZB]. several reputable news organizations including the New York Times from White House press briefings, there remains a concern that an executive agency like the FAA will be influenced by political affilia- tion in making the determination to grant or deny a waiver. risk inherent in any waiver system that discretion will be exercised with discriminatory intent makes it critical that the FAA conduct a further rulemaking to more decisively determine which restrictions under Part 107 are necessary to mitigate public risk and which may be abandoned in the future. www.nytimes.com/2017/02/24/us/politics/white-house-sean-spicer-briefing.html? _r=0 [http://perma.cc/D5Q3-MQ6J]. It should be noted that CNN received first the certificate of waiver for flight over human beings in August 29, 2016 (expira- tion date set August 31, 2020). It appears to be the only company to have obtained this waiver to date. 40268-nys_73-2 Sheet No. 98 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 98 40268-nys_73-2 40268-nys_73-2 Sheet No. 98 Side B 05/23/2018 07:56:14 113 ARRY B , it is time to In light of the 111 Knotts the Court held that the war- 112 109 , III. The Court rejected defendant’s argument IN THE DIGITAL AGE 110 United States v. Knotts at 278–79, 281–82. at 283–84. at 284. REASONABLE EXPECTATIONS OF PRIVACY Id. Id. Id. The advent of the drone, with its potential to facilitate dragnet In order to preserve core constitutional values, including the At the very least, it would be constitutionally untenable for the 109. 460 U.S. 276 (1983). 110. 111. 112. 113. For extended discussion of the constitutionality of warrantless searches law enforcement practices, invites the reconsideration of the doc- trine of “knowing exposure” as a limitation on Fourth Amendment protection. In quired to establish probable cause and obtain a warrant before pro- ceeding in either of two distinct law enforcement situations. rights to speak and associate freely, the government must be re- FAA FAA to return to its former policy of uniformly barring commercial drones from accessing the NAS regardless of whether drone opera- tion implicated matters of public interest. It is fair to say the initial rulemaking will operate as a floor in terms of access, but it should not constitute the ceiling. Constitutional concerns should compel the FAA to increase the scope of access to the NAS for news media and other drone operators seeking to record newsworthy events as technology develops to ensure public safety. distinguishing between suspicion-based and suspicion-less searches see 346 NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:323 \\jciprod01\productn\N\NYS\73-2\NYS205.txt unknown Seq: 24 23-MAY-18 7:38 that extending the third party doctrine in this manner would inevi- tably lead to the warrantless “twenty-four hour surveillance of citizen of any this country,” but conceded that “if such dragnet-type law enforcement practices as respondent envisions should occur, there will be time enough then eventually to determine whether differ- ent constitutional principles may be applicable.” position to observe. rantless installation of a “beeper” allowing law enforcement to track the movements of the defendant’s car did dant’s not Fourth Amendment violate rights the because defen- the defendant lacked reasonable a expectation of privacy in the public movements of car—such his information was “voluntarily conveyed” to anyone in a sweeping transformation of culture and society since the advent of digital technology in the years intervening since reassess the “constitutional principles . . . applicable” tion knowingly to exposed to informa- the public. 40268-nys_73-2 Sheet No. 98 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 98 40268-nys_73-2 40268-nys_73-2 Sheet No. 99 Side A 05/23/2018 07:56:14 no one 117 , (2017) (“When However, if the 201 114 note 33, at 71. ERMISSION P supra Kyllo v. United States ITHOUT Blitz, W and See Following the doctrinal trajectory es- 116 115 OLICING : P if the First Amendment keeps open a certain avenue of aerial “ Florida v. Riley NWARRANTED , U Not only does drone journalism increase the likelihood of an 116. 488 U.S. 445 (1989). 117. 533 U.S. 27 (2001). 114. New Jersey v. T.L.O., 469 U.S. 325, 342 (1985) (Blackmun, J., concur- 115. For extended discussion of how Fourth Amendment case law has evolved RIEDMAN F 2018] First, any targeted suspicion-based surveillance trigger the by probable drone cause should and Fourth warrant Amendment, regardless of requirements whether the surveillance under is brief the or extended. On the other hand, where drone surveillance is suspi- cion-less (i.e., random or universal in application) and individuals DRONE are subjected REGULATIONonly to temporary, time-bounded surveillance (partic- ularly in situations mandating heightened caution to preserve pub- lic safety), the Fourth Amendment doctrine of special needs should allow government monitoring without a warrant. 347 \\jciprod01\productn\N\NYS\73-2\NYS205.txt unknown Seq: 25 23-MAY-18 7:38 observation to private citizens, it may also—at least as a default matter—keep that avenue open to law enforcement.” tablished by ring) (explaining that the special needs tional doctrine circumstances applies only in “in which those special excep- enforcement, make needs, the warrant and probable beyond cause requirement impracticable”). the normal need for law to the effect that searches are suspicion based, there should be probable cause, except for the lim- ited use of reasonable suspicion in stop and frisk, subject to the officers proviso must that say what still crime they suspect is afoot. Suspicion-less searches must af- fect everyone or be truly random.”). observable in public spaces would retain a reasonable expectation individual being unwittingly caught on camera while navigating the public space, but under the current Fourth Amendment doctrine, the more pervasive the civilian use of drones, the stronger the gov- ernment’s right to surveil its Amendment citizenry protections. without triggering Fourth government then seeks to preserve and/or lected analyze during the the data col- generalized surveillance cense (e.g., employing plate a reader li- reference data or against other facial stored recordings), quired recognition to establish probable cause and it obtain a warrant. Prolonged should technology be re- to mass cross- warrantless surveillance, like that Surveillance in Baltimore, which extends beyond the scope of undertaken a dis- by Persistent crete event warranting heightened security, constitutes too grave an encroachment on individual privacy in helps to illuminate, and therefore should ways be deemed to violate the that mosaic theory Fourth Amendment prohibition against unreasonable search and seizure. 40268-nys_73-2 Sheet No. 99 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 99 40268-nys_73-2 40268-nys_73-2 Sheet No. 99 Side B 05/23/2018 07:56:14 121 One of 119 Kyllo, 533 U.S. at see also But this result critically https://www.theguardian.com/us- 118 . 29, 2016), This chilling effect goes to the core of 120 Sept , ( NYPD Sent Undercover Officers to Black Lives Matter Protest, Shelton v. Tucker, 364 U.S. 480, 485–86 (1960) (“[A state UARDIAN G see also HE T Buckley v. Valeo, 424 U.S. 1, 15 (1976) (“[T]he First Amend- , Riley, 488 U.S at 455 (O’Connor, J., concurring) (explaining that “if See See There now exists a real possibility that the government may ob- 118. 119. 120. George Joseph, 121. New York Times Co. v. Sullivan, 376 U.S. 254, 270 (1964). suspicion-based type of warrantless surveillance, key First ment Amend- rights may be radically constrained. Recognizing journalists’ First Amendment “right to record” using drones need not reduce tain a waiver to record public protests using drones equipped with facial recognition technology and then analyze those recordings to identify repeat players, all without Without a shoring warrant up or Fourth probable Amendment cause. protections against this 348of invisibility to NYU drone ANNUAL surveillance. SURVEY OF AMERICAN LAW [Vol. 73:323 \\jciprod01\productn\N\NYS\73-2\NYS205.txt unknown Seq: 26 23-MAY-18 7:38 Records Reveal 34 (implying use of sense-enhancing “where . technology . . the may technology in question only is not in constitute general public use”). a search ment protects political association as well as political expression.”). the First Amendment’s “commitment to the principle that debate on public issues should be uninhibited, robust, and wide-open.” threatens threatens the constitutional protections of speech and association guaranteed under the First Amendment. For example, consider the recent case involving NYPD surveillance of participants in the Black Lives Matter (BLM) campaign after the June Garner on Staten Island, 2014 New York. This kind death of covert and under- of Eric en- to decision individual’s an impact easily could surveillance cover gage in public protest against police use of lethal force or associate generally with persons involved with the BLM movement. news/2016/sep/29/nypd-black-lives-matter-undercover-protests news/2016/sep/29/nypd-black-lives-matter-undercover-protests [https://perma .cc/PLD6-A3DF]; statute compelling] every teacher, as a condition ported of school employment or in a college, state-sup- to file every organization annually to which an he has affidavit belonged or listing regularly contributed without within preceding the limitation five years . . . impair[s] that teacher’s right of free closely allied association, to a freedom of right speech and a right which, like free speech, lies at the foundation of a free society.”). the attorneys litigating for the surveillance records on behalf of par- ticipants in the movement describes the real possibility of the First Amendment chill resulting from this type of police activity: “It’s dis- turbing to know the NYPD may have a file on me, ready to be used or to prevent me from getting a job simply because I’ve been active capacity.” political some in the public can generally be expected to travel over residential backyards” at a cer- tain altitude there is no longer a reasonable expectation subject to such “aerial observation” even of if that space would normally enjoy Fourth privacy in the space Amendment protection as curtilage to a person’s home); 40268-nys_73-2 Sheet No. 99 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 99 40268-nys_73-2 40268-nys_73-2 Sheet No. 100 Side A 05/23/2018 07:56:14 Jus- , the frame- 123 Katz Katz Following 124 slightly sharpened the consti- 128 to the public, even in his own home own his in even public, the to the Court extended the 126 , , 114 (2015) (“Katz is only a one-step test. Subjective Florida v. Riley Katz Has Only One Step: The Irrelevance of Subjective Expecta- . 113 EV 127 knowingly exposes knowingly . L. R long credited as the “seminal case in modern ‘search’ HI at 351 (emphasis added). at 361 (Harlan, J., concurring). To determine whether the defendant’s Fourth Amend- 122 , Id. Id. Id. California v. Ciraolo 125 82 U. C Katz In 123. 124. 125. Orin S. Kerr, 122. 389 U.S. 347 (1967). 126. 476 U.S. 207, 214 (1986). 127. 128. 488 U.S. 445 (1989) (O’Connor, J., concurring) (plurality opinion). , A. From Property to Privacy: The Evolution of the Fourth Amendment work to aerial surveillance, holding that warrantless aerial observa- tion of Ciraolo’s backyard from an altitude constitute of an illegal search 1,000 triggering the feet Fourth Amendment did war- not rant requirement because “any member of the public flying in this airspace who glanced down could have seen ficers observed.” everything these of- tions law” for taking a privacy-based approach, defined Fourth ment Amend- protections rather unhelpfully in the negative, holding person a “what that posed—either to a third party or to the public in general—the de- fendant’s expectation of privacy is constitutionally diminished. ment rights are implicated by any Court given focuses on government whether action, the the defendant’s expectation was of reasonable. privacy If the information is to some degree already ex- 2018] Fourth Amendment privacy protections that help sustain other im- portant First Amendment rights of protest and free association. DRONE REGULATION 349 \\jciprod01\productn\N\NYS\73-2\NYS205.txt unknown Seq: 27 23-MAY-18 7:38 tutional inquiry to focus on the likelihood of observation as expectations are irrelevant. A majority of courts that apply Katz do not even men- tion the subjective inquiry; when it is when it mentioned, is applied, it it makes is no difference usually to outcomes.”). not applied; and or office, is not a subject of Fourth Amendment protection.” tice Harlan’s concurrence provides a two-prong test that has since become the centerpiece expecta- (subjective) actual an exhibited have person a that “[F]irst, of Fourth Amendment tion of privacy and, second, that the expectation jurisprudence: be one that society is prepared to recognize as ‘reasonable.’” Court’s Fourth Amendment analysis has centered almost exclusively almost centered has analysis Amendment Fourth Court’s on the second (objective) prong of Justice Harlan’s two-part test; it seems to matter little whether the defendant manifests a subjective expectation that the exposed information in question remain con- cealed. 40268-nys_73-2 Sheet No. 100 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 100 40268-nys_73-2 40268-nys_73-2 Sheet No. 100 Side B 05/23/2018 07:56:14 , Extending this For Justice Bren- 129 130 Perspectives on the Fourth 614, 619 (2011) (“[A] future (“[A] (2011) 619 614, . EV By adjusting the doctrinal . L. R L. . 133 D M , 70 , Home, Home on the Web and Other Fourth Amend- As Orin Kerr has argued, the Supreme 132 349, 403 (1974)). . EV Constitutional Equilibrium An Equilibrium-Adjustment Theory of the Fourth Amendment , Justice Brennan seemed to foresee this very is- . L. R 476, 480 (2011). Riley . INN EV M paradigm to drone surveillance, the Court would likely B. Updating the Fourth Amendment to Preserve at 456 (quoting Anthony G. Amsterdam, at 455 (arguing that the Fourth Amendment doctrine developed at 458 (Brennan, J., dissenting). Katherine Strandburg, , 58 131 Id. Id. Id. See . L. R dictates that the Court ask whether the helicopter was in the public air- ARV The Fourth Amendment doctrine can and should evolve to Katz 130. 131. 129. 132. 133. Orin S. Kerr, H governmental intrusion. preserve individual privacy and First Amendment freedoms in a mo- a in freedoms Amendment First and privacy individual preserve ment where technology renders citizens increasingly vulnerable to post- ways at an altitude at which members of the public travel with sufficient regularity that Riley’s expectation of privacy from aerial observation was not “one that society is prepared to recognize as reasonable”) (internal citation omitted). 350 opposed to the NYU sheer ANNUAL possibility of SURVEY discovery. OF AMERICAN LAW [Vol. 73:323 \\jciprod01\productn\N\NYS\73-2\NYS205.txt unknown Seq: 28 23-MAY-18 7:38 Court has historically preserved a certain equilibrium of privacy and privacy of equilibrium certain a preserved historically has Court government access to information. ment Implications of Technosocial Change Technosocial of Implications ment framework according to relevant technology, lowering protection where technology frustrates ease of government access to informa- tion and “embrac[ing] higher change “makes evidence substantially easier protections” for the government to when technological obtain,” the Court preserves a consistent level of privacy protec- nan, the reasonableness of privacy expectations must not become merely an empirical inquiry; the Court should deem with itself making tasked normative determinations regarding how vacy may be conceded much before constitutional protections are eroded pri- to the point society.” “inconsistent with the aims of a free and open is nearly upon us that will make it impossible to preserve the privacy even of tradi- tional Fourth Amendment bastions, such as the intertwined effects home, of without technological and considering social change.”). the 125 Ciraolo–Riley find that as commercial drones gain popularity, public surveillance by drone happens with “sufficient regularity” to render the expecta- tion of privacy from aerial observation unreasonable. the dissent Writing in for sue, commenting: “It the Fourth Amendment can be so largely defined is by administrative a regulations issued for curious purposes of flight safety.” notion that the reach of Amendment 40268-nys_73-2 Sheet No. 100 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 100 40268-nys_73-2 40268-nys_73-2 Sheet No. 101 Side A 05/23/2018 07:56:14 the 135 The appeal of this type 137 Olmstead Olmstead v. United States IV. 136 at 474 (Brandeis, J., dissenting). Id. Id. MOSAIC THEORY AND DRONE SURVEILLANCE If Kerr is correct, then the availability of drone surveillance 134 Preserving constitutional equilibrium requires a revaluation of Almost a century ago, Justice Brandeis made a similar point, The key insight of mosaic theory is that when the government 134. 135. Olmstead v. United States, 277 U.S. 438 136. (1928). 137. United States v. Jones, 565 U.S. 400, 416 (2012) (Sotomayor, J., concur- the government should be required to show probable cause before recourse to these types of investigations. Fourth Amendment doctrine to preserve constitutional protection against mass surveillance. Certain investigative techniques includ- ing drone surveillance are likely to give the government ready cess to intimate ac- details of the target subject more or less “at will” by virtue of the mosaic effect as discussed below. In light of this fact, ring) (“I would ask whether people reasonably expect that their movements will be recorded and aggregated in a manner that enables the government to more or less ascertain, at will, their political and religious beliefs, sexual habits, and so on.”). 2018]tion. DRONE REGULATION 351 \\jciprod01\productn\N\NYS\73-2\NYS205.txt unknown Seq: 29 23-MAY-18 7:38 and the ease at which personal information may be aggregated and analyzed should induce the Court to heighten Fourth Amendment protections to preserve the baseline equilibrium. anticipating the need to adapt Fourth the law Amendment enforcement technology. principles In to into the nature of the privacy investigative intrusion techniques must contemplated inform Fourth by Amendment doctrine certain of categorical approach is manifest when compared with the likely result of the straightforward application of existing Fourth Amend- ment doctrine. compiles sufficient information to discern a pattern of behavior, the mosaic (the whole) is more revealing than individual the sum of its parts (each discrete piece of information obtained). This insight party’s house. Justice Brandeis dissented: “Ways may some developed day be by which the from secret Government, drawers, can reproduce them in without court, and by which it removing papers will be enabled to expose to a jury the most intimate occurrences of the home. . . . Advances in the bring psychic and related means sciences may of emotions.” exploring unexpressed beliefs, thoughts and Court found that wiretapping the defendant’s telephone amount to a search because it entailed no did “physical invasion” of the not 40268-nys_73-2 Sheet No. 101 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 101 40268-nys_73-2 40268-nys_73-2 Sheet No. 101 Side B 05/23/2018 07:56:14 139 141 , 205 . The held Knotts EV 140 . . R T For exam- Knotts . C 146 UP S Even though the Actual Expectations of Pri- 144 , 2015 145 ., United States v. Jones, 565 Even though United United States v. Maynard United States v. Jones 142 And most importantly, the 147 aff’d sub nom Ginsburg maintained that 143 did not control. The theory was influentially, first articulated by 138 Knotts , 615 F.3d 544. , 565 U.S. at 404. at 556-58. at 556 (quoting United States v. Knotts, 460 U.S. 276, 281 (1983)). at 557. at 560. at 562. Matthew B. Kugler & Lior Jacob Strahilevitz, See Jones Maynard Id. Id. Id. Id. Id. Id. That likelihood could well increase as civilian drone use 138. 140. 141. 142. 143. 144. 145. 146. 147. 139. 615 F.3d 544 (D.C. Cir. 2010), short-term, GPS tracking does not increase at the same incremental rate across time. To the extent long-term surveillance reveals what “a person does repeatedly, what he does not do, and what he does ensemble,” surveillance becomes exponentially more invasive when sufficient data is compiled to analyze in the aggregate. proliferates, but Judge Ginsburg’s observation is helpful because it highlights how the invasiveness of extended, as compared with 352in the digital age. NYU ANNUAL SURVEY OFlater reviewed by AMERICANthe Supreme Court in LAW [Vol. 73:323 Emphasizing the prolonged nature of the surveillance, Judge Gins- burg found that \\jciprod01\productn\N\NYS\73-2\NYS205.txt unknown Seq: 30 23-MAY-18 7:38 does not stand for the proposition that “such a person has no rea- sonable expectation of privacy in his movements whatsoever, world without end, as the Government would have it.” defendant’s movements were exposed to the public eye, Ginsburg reasoned that a person still retains a reasonable expectation of pri- vacy in the “whole of [his] movements over the course of a month” because the “likelihood a stranger would observe ments all is not those just remote, move- it is essentially nil.” fares has no reasonable expectation of privacy from in one his place movements to another,” that “[a] person traveling in an automobile on public thorough- Judge Judge Ginsburg on the D.C. Circuit in ple, “repeated visits to a church, a gym, a bar, or a bookie tell a story a tell bookie a or bar, a gym, a church, a to visits “repeated ple, not told by any single visit, as does one’s not places visiting over any the of course these of a month.” D.C. Circuit held that installing and operating a GPS tracking vice de- on the defendant’s car for a period of twenty-eight days consti- tuted a search within the meaning of the Fourth Amendment. U.S. 400 (2012). (Coase-Sandor Institute for Law and (2015) (“[T]he government can learn Economics more from a given slice Working of information if it Paper No. can put 727, that information in 205 the context of a broader pattern, a mosaic.”). vacy, Fourth Amendment Doctrine, and the Mosaic Theory 40268-nys_73-2 Sheet No. 101 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 101 40268-nys_73-2 40268-nys_73-2 Sheet No. 102 Side A 05/23/2018 07:56:14 150 While Justice Alito de- 149 Because “GPS monitoring 151 Practical checks that may have other- This section will apply mosaic theory to 152 148 , 565 U.S. at 430 (Alito, J., concurring) (“[R]elatively short-term (“We need not identify with precision the point at which the tracking at 415 (Sotomayor, J., concurring) (“In cases involving even short- Id. Id. Id. Jones Id. analysis will require particular attention.”). filed separately by Justices Sotomayor and Alito (joined by The Supreme Court has indicated some willingness to consider By contrast, Justice Sotomayor recognizes that drawing the line A. Mosaic Theory and GPS Tracking in United States v. Jones 150. 151. 148. 149. 152. Katz a mosaic theory of the Fourth Amendment; concurring opinions in Jones Ginsburg, Breyer, and Kagan) follow consider Judge the government Ginsburg’s actions in lead light of and mosaic theory. Justice Alito emphasized the duration of the GPS tracking, finding that the extended monitoring—“catalogu[ing] every single movement of an individual’s car”—constituted a “degree of intrusion that a reasona- ble person would not have anticipated.” of permissibility on the basis of duration may fail to adequately pre- serve Fourth and First Amendment freedoms in the face of contem- porary surveillance technology. privacy that our society has recognized as reasonable. But the use of longer GPS term monitoring in investigations of most offenses privacy.”) (citing impinges United States on v. Knotts, expectations 460 U.S. of 276, 281–82 (1983)). of this vehicle became a search, for the line was surely crossed before mark.”). the 4-week monitoring of a person’s movements on public streets accords with expectations of 2018] pattern or “sequence of a person’s movements can reveal still more; a single trip to a gynecologist’s office tells little about a woman, but that trip followed a few weeks later by a visit to a baby supply store tells a different story.” DRONE REGULATION 353 \\jciprod01\productn\N\NYS\73-2\NYS205.txt unknown Seq: 31 23-MAY-18 7:38 wise impacted the scope of government investigations are dimin- generates a precise, comprehensive record movements,” it of allows the a government person’s swift and public wealth easy of detail about access her familial, political, professional, to religious, “a and sexual associations.” clines to pinpoint the threshold duration distinguishing permissible distinguishing duration threshold the pinpoint to clines from impermissible GPS surveillance, some warrantless short-term his GPS monitoring may opinion be permitted. suggests that consider consider the privacy interests impacted by drone surveillance to ar- gue that the invasive potential of even relatively short-term surveil- lance by drone should require a warrant based on probable cause when that surveillance is part of a targeted investigation. term monitoring, some the unique attributes of GPS surveillance relevant to 40268-nys_73-2 Sheet No. 102 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 102 40268-nys_73-2 40268-nys_73-2 Sheet No. 102 Side B 05/23/2018 07:56:14 158 Riley v. 155 , certain Jones If Fourth Amend- 154 note 139, at 208 (“[I]n light of Alito’s and Alito’s of light (“[I]n 208 at 139, note Court applied mosaic theory to and the Court’s holding in —that anything on the person can be supra 156 Riley 159 The Court reasoned that cellphone 160 As Justice Sotomayor makes clear, the ease with 153 concurrences may forecast the Court’s move away from the secrecy , 565 U.S at 416 (“[A]wareness that the government may be watch- , 134 S. Ct. at 2488 (“The fact that an arrestee has diminished pri- at 416. Kugler & Strahilevitz, & Kugler Jones 157 B. Beyond the Secrecy Paradigm in Riley v. California Id. Id. Jones Id. See Riley The 153. 154. 155. 156. 157. Riley v. California, 134 S. Ct. 2473 158. (2014). 159. United States v. Robinson, 414 U.S. 218, 235 (1973) (“It is the fact of the 160. United States v. Robinson ing chills associational and expressive freedoms.”). only a short time. The paradigm toward a mosaic Along theory-based the approach lines to described privacy. by types of Justice searches may Sotomayor be so inherently in invasive that they automati- cally trigger the warrant requirement regardless of whether the in- formation gathered is publicly exposed or whether the search lasts 354 ished in the face NYU of surveillance cost-efficient by ANNUALdrone, is “cheap in comparison to technology. conventional sur- SURVEY GPS tracking, OF like veillance AMERICAN techniques LAW and, by evades design, the ordinary proceeds checks [Vol. 73:323 that surreptitiously, constrain constitutionally it abusive law enforcement practices: ‘limited police resources and nity commu- hostility.’” \\jciprod01\productn\N\NYS\73-2\NYS205.txt unknown Seq: 32 23-MAY-18 7:38 searched without a warrant incident to a extend lawful arrest—does to not cellphones. which the government may collect and “assemble data that reveal private aspects of identity” is poised to transform the nature of the relationship between the citizen and the state. theory and its ‘duration-sensitive’ approach.”). lawful arrest which establishes the authority to search, and we hold that in the case of a lawful custodial arrest a full search of the person is not only an the exception to warrant requirement of the Fourth search under Amendment, that Amendment.”). but is also a ‘reasonable’ vacy interests does not mean that the Fourth Amendment falls out of the picture entirely. Not every search ‘is acceptable solely because a person (quoting Maryland is v. in King, custody.’”)133 S. Ct. 1958, 1979 (2013)). Sotomayor’s opinions, it seems likely that there are now five votes for the mosaic cellphone searches by holding that the bright-line rule established in ment doctrine fails to awareness internalize that the insight the of government movements and mosaic interactions may may have profound chilling effects theory, on be monitoring one’s First Amendment freedoms of daily expression and association. California 40268-nys_73-2 Sheet No. 102 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 102 40268-nys_73-2 40268-nys_73-2 Sheet No. 103 Side A 05/23/2018 07:56:14 Through 166 Like cellphones, drones 164 But more importantly, the Court The digital storage capacity of 162 161 note 27, at 215. supra , 565 U.S. at 429 (Alito, J., concurring) (“In the precomputer , 134 S. Ct. at 2489. , Kaminski, at 415 (Sotomayor, J., concurring)J., (Sotomayor, 415 at pre- a generates monitoring (“GPS The cellphone allows the government quick access to a Riley Id. Id. See Jones Id. See Margot Kaminski argues that “persistent surveillance” of an 163 165 The mosaic effect produced by cellphones is so dramatic in 161. 162. 163. 164. 165. 166. constant monitoring of the location of a vehicle for four weeks—would have re- 2018] searches are quantitatively and qualitatively their distinguishable from analog counterparts. DRONE REGULATION 355 \\jciprod01\productn\N\NYS\73-2\NYS205.txt unknown Seq: 33 23-MAY-18 7:38 individual producing a prolonged time, eradicating the practical recording limitations on a government similarly search collapses that may have previously shielded individual privacy. found that cellphone searches are distinguishable in kind, because “a cell phone collects in one place many distinct types of informa- tion—an address, a video—that note, reveal much more in combination than any isolated re- a prescription, cord.” a bank statement, a highly personal mosaic—each discrete individual record becomes far more revealing when viewed in combination with the other per- sonal records digitally stored on an individual’s phone. part because cellphones collapse time—a browsing or call may reveal several history months’ worth of information in a single glance. In the past, limited resources would have placed a practical limit on investiga- intensive most the reserving searches, certain of depth the tions for those persons suspected of the most serious crimes. In the contemporary moment, cellphones—unshackle government digital investigative these strategies technology—drones, historical from practical limitations. GPS, cellphones cellphones means “the possible intrusion on privacy cally limited is in the not same way.” physi- tion . . . can reconstruct someone’s specific movements down to the minute, not only around town but also ing.” within a particular build- the analysis of an extended surveillance, “individual moments of in- may also act as GPS tracking devices: “Historic location informa- and costly and therefore rarely undertaken. The surveillance at issue in this case— quired a large team of agents, Only an investigation multiple of unusual importance could have justified such an expendi- vehicles, and perhaps aerial assistance. ture of law enforcement resources.”). age, the greatest protections of privacy were neither constitutional nor but practical. Traditional surveillance statutory, for any extended period of time was difficult cise, comprehensive record of a person’s public movements that reflects a wealth of detail associations.”). about her familial, political, professional, religious, and sexual 40268-nys_73-2 Sheet No. 103 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 103 40268-nys_73-2 40268-nys_73-2 Sheet No. 103 Side B 05/23/2018 07:56:14 , L.A. TIMES (May 2, 2013), http:/ Drones and the Fourth Amendment: Redefining 1129, 1150 (2014-2015) (citing Amina Khan, L.J. 515, 547–48 (2015–2016). . Never Alone: Why the Inevitable Influx of Drones Necessi- 170 UKE EV D Unlike GPS, a drone can provide a high-resolu- Drones may be equipped with facial recognition . L. R , 64 at 548–49. 168 169 id. ALT C. Extending Riley to Drone Surveillance , 45 U. B Id. See, e.g. , If mosaic theory reveals a cellphone search to be so inher- 167 The precision and amount of data that may be swiftly and If cellphones allow the government to access the same depth of depth same the access to government the allow cellphones If 167. 168. Paul Burgin, Note, 169. 170. Matthew R. Koerner, Note, cheaply compiled by law enforcement employing drone technology mandate a similar categorical treatment of targeted drone surveil- lance. Recent studies demonstrate that lance short-term can drone yield surveil- far more information than similar duration. GPS surveillance of a personal information that historically would have demanded a sig- nificant expenditure of time and resources, drone surveillance re- tains the potential for a similarly cheap and swift deep-dive into the totality of a person’s intimate life. It follows that any doctrine needs special the While warrant. a require should veillance targeted sur- cer- in surveillance drone of initiation warrantless the protects likely tain situations, aggregation and analysis of any collected tion informa- should always be subject to a showing of cause warrant. and require a tates a New Fourth Amendment Standard that Adequately Protects Reasonable Expectations of Privacy 356 teraction, spread out over time and mitigated through human for- NYU getfulness” are ANNUAL concentrated into “one long story of an individual’s SURVEY OFlife.” AMERICAN LAW [Vol. 73:323 \\jciprod01\productn\N\NYS\73-2\NYS205.txt unknown Seq: 34 23-MAY-18 7:38 three centimeters long. technology, license plate readers, and visual ment, and may and be virtually undetectable with a wingspan as small as audio enhance- ently invasive that it automatically triggers the warrant requirement regardless of duration, the same logic should drone surveillance. extend to targeted Meet RoboBee, a Bug-sized, Bio-inspired Flying Robot /articles.latimes.com/2013/may/02/science/la-sci-sn-flying-robot-robobeesmal- lest-ever-20130502 [https://perma.cc/ZJ2E-2LX9]). tion visual record of an individual’s movements through any given public space, revealing nuances of a person’s interaction with the space—for example, whether they entered the tiously or knocked at the front door—that building would be otherwise inac- surrepti- cessible by GPS. Expectations of Privacy 40268-nys_73-2 Sheet No. 103 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 103 40268-nys_73-2 40268-nys_73-2 Sheet No. 104 Side A 05/23/2018 07:56:14 . . . . . Illi- the 173 with Ciraolo 705, 723–24 (2017) (pro- . EV But if, for example, sur- 175 . L. R The government interest is ICH 176 U. R The case law defining the line be- 51 174 Preventing an Air Panopticon: A Proposal for Reasonable Special Special Needs Doctrine —should guide the doctrine in this area. Finding —thatwhat discern to technology of use government Indianapolis v. Edmond, 531 U.S. 32, 42 (2000) (holding that 172 171 Jake Laperruque, Laperruque, Jake at 341 (majority opinion). D. Exceptions to the Warrant Requirement Under the Cf. Id. Compare Kyllo An extended discussion of the special needs doctrine as an ex- To protect privacy interests against discriminatory exercises of 171. 533 U.S. 27 (2001). 172. 173. New Jersey v. T.L.O., 469 U.S. at 174. 351 (Blackmun, J., concurring). 175. 176. Brown v. Texas, 443 U.S. 47, 50 (1979). ception to the Fourth Amendment warrant requirement is beyond the scope of this Note. Suffice it to say that the Court’s determina- in tion posing a “naked eye” rule that would expand “the doctrine expressed in would otherwise not be readily perceptible to the naked eye consti- tutes a search 2018] DRONE REGULATION 357 \\jciprod01\productn\N\NYS\73-2\NYS205.txt unknown Seq: 35 23-MAY-18 7:38 lance observed via other technologies”). drug interdiction checkpoints violated the Fourth Amendment because the pose pur- of the checkpoint was to uncover “ordinary criminal wrongdoing”) nois v. Lidster, 540 U.S. 419, 425–26 (2004) (checkpoint set up for route the at travel regularly who persons interviewing of purpose the with the and-run site of hit- information regarding the crime). to differentiate between aerial surveillance seen by the naked eye with the surveil- Amendment, the Court sometimes bright-line warrant and probable cause permits requirements. Accordingly, deviation from the Court the has held “in those exceptional special needs, circumstances beyond the normal in need for law which enforcement, make the warrant and probable cause requirement impracticable” that “reasonableness” is the ultimate touchstone of the Fourth Legal Restrictions on Aerial Surveillance, the asserted government interest. veillance of a large public protest to ensure public safety constitutes a special need, then the court, in deciding whether a warrant required, will balance the was nature of the individual intrusion against substantial—preservingsecurity—butnational and safety public the court must also consider the nature of the intrusion by looking for adequate safeguards to substitute for the warrant requirement. law enforcement discretion, the Court requires a certain degree of generality or randomness to guard against the inequitable exercise tween searches for ordinary “law enforcement” or “crime control” purposes as opposed to those justified on the basis of governmental “special needs” is somewhat convoluted. “legality of a search . . . should depend simply on under reasonableness, all the circumstances.” 40268-nys_73-2 Sheet No. 104 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 104 40268-nys_73-2 40268-nys_73-2 Sheet No. 104 Side B 05/23/2018 07:56:14 This buffering ap- 180 in situations demanding As applied to drone surveil- 179 177 V. CONCLUSION note 172, at 724. supra , Nat’l Treasury Emps. Union v. Von Raab, 489 U.S. 656, 679 at 663 (striking down the constitutionality of random stops made by . Categorically prohibiting prolonged recording also Id See, e.g. Id. 181 or randomized surveillance There may be something counterintuitive in arguing that the 178 181. 179. 180. Laperruque, 177. Delaware v. Prouse, 440 U.S. 648, 654–55 (1979) (“In those situations in 178. government’s capacity to compose mosaics justifies the imposition of probable cause requirements even when the same information has been exposed to actual or potential acquisition by constitution- ally protected news gatherers. Of course, the government is not highway patrol in an effort to catch unlicensed and unsafe that “[t]his drivers holding does but not preclude clarifying the State of Delaware or other States from developing methods for spot checks that involve less intrusion or that volve do the not unconstrained in- exercise of discretion”). (1989) (holding that random suspicionless drug testing of “employees who apply for promotion to positions directly involving the interdiction of illegal drugs, or to positions that require the incumbent to carry a firearm, is reasonable”). which the balance of interests precludes insistence upon ‘some quantum of indi- vidualized suspicion,’ other safeguards are generally relied upon to assure that the individual’s reasonable expectation of privacy is not subject to the discretion of the official in the field.”) (citation omitted). guards against the risk that law enforcement will search footage us- ing tagging technologies (e.g., facial recognition software or license plate reader) or taining other a warrant. sense-enhancing technology before ob- 358of untrammeled officer discretion. NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 73:323 \\jciprod01\productn\N\NYS\73-2\NYS205.txt unknown Seq: 36 23-MAY-18 7:38 gent circumstances or special needs exist, Jake Laperruque suggests the “use of a pre-event video buffer, whereby a very short period of video is continuously recorded and deleted.” heightened heightened security for a discrete short-term period. To the extent the drone replaces what would otherwise be law enforcement’s on- the-ground observational presence, this should cording also and storing footage for preclude possible later analysis. As re- a kind of compromise between the warrant requirement under the Amendment and exceptions to the Fourth general requirement where exi- lance, lance, it may be permissible for eral the government to operate gen- proach would allow law enforcement to gather “key information” in contin- of privacy to “risk the avoid would but exigency, of event the uous mass collection lance.” and data storage through aerial surveil- 40268-nys_73-2 Sheet No. 104 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 104 40268-nys_73-2 40268-nys_73-2 Sheet No. 105 Side A 05/23/2018 07:56:14 By 184 DreamHost ar- 185 the warrant left open the possibility 186 finding that police use of a trained drug 182 , at 1410. at 1. at 1424 (Alito, J., dissenting) (“I see no basis for concluding that the In his dissent, Justice Alito questioned whether people Id. Id. Id. 183 Florida v. Jardines The constitutional issues surrounding government access to 183. 184. 182. 133 S. Ct. 1409 (2013). 185. Non-Party DreamHost, L.L.C. Response in Opposition to U.S. Motion 186. 2018] alone in exploiting the revelatory power of the data mosaic. But the case law reflects the common intuition that being government search the is different. This logic target guided the Court’s of hold- a ing in DRONE REGULATIONhave a “reasonable expectation of privacy that can with be smelled by someone respect standing at their to front door. odors” 359 \\jciprod01\productn\N\NYS\73-2\NYS205.txt unknown Seq: 37 23-MAY-18 7:38 detection detection dog at the front door search. of a private home constitutes a that the privacy of individuals far removed from the criminal inves- tigation would be unconstitutionally violated. In an interview with NPR, Mark Rumold, senior staff attorney at the Electronic Frontier Foundation, highlighted the constitutional stakes involved: “Most critically, [Department of Justice (DOJ)] is still investigating a web- site that was dedicated to organizing and planning political dissent and protest. That kind of activity—whether online or off—is the occupants of a dwelling have a reasonable emanate expectation from of the privacy dwelling in and odors reach that spots lawfully stand.”). where members of the public may for DreamHost to Show Cause, In the Matter No. of the 17 Search www.disruptj20.org, CSW 3438 [https://perma.cc/VN7F-BQMC]. (D.C. Sup. Ct. Aug. 18, 2017), http://www.disruptj20.org gued that the search warrant was invalid for “fail[ing] being to overbroad. By identify with the seized required by the particularity government,” what will be all email accounts associated with the website. implies a constitutional distinction between information knowingly exposed to the public and information in which an individual, de- Fourth for privacy of expectation reasonable a holds exposure, spite Amendment purposes. third party databases in many ways parallel constitutional concerns prompted by government drone surveillance. Fourth The Amendment secrecy-based framework from unreasonable provides government intrusion when dealing insufficient with large insulation caches of data (stored in the cloud or filmed from cloud level). For example, DreamHost, a web hosting company, balked at ernment’s the request gov- for all records or other information pertaining to an inauguration protest-organizing site DisruptJ20.org, including finding use of the drug sniff dog impermissible, the Court tacitly 40268-nys_73-2 Sheet No. 105 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 105 40268-nys_73-2 40268-nys_73-2 Sheet No. 105 Side B 05/23/2018 07:56:14 , and and In and factually Fourth Amendment United States v. Upham, 168 F.3d and may be searched or seized—not how—and what 187 Brooks v. United States, 427 F.3d 1246, 1251 (10th Cir. 2005) United States v. Hill, 459 F.3d 966, 975 (9th Cir. 2005) (“Al- with Compare Justice Department Narrows Request for Visitor Logs to Inauguration Protest Web- In order to prevent drone warrants from becoming so gen- there is sufficient cause for the invasion of privacy thus entailed.”), 188 The DreamHost litigation clearly illustrates the First Amend- 188. 187. , NPR, (Aug. 23, 2017, 7:51 PM), http://www.npr.org/sections/thetwo-way/ Search of Apple iPhone, 31 F. Supp. 3d 159, 166 (D.D.C. 2014) (“[A] sufficient tains of data stored by a private third party. Circuits divided are on currently the propriety of imposing scope of ex a search authorized ante by warrant, such limitations as prescribing a on par- the ticular search protocol, imposing a date range on data made availa- ble, and compelling the government to incriminating waive plain information view found for any beyond rant. the scope of the war- ment implications of databases. government These search issues and persist drone seizure surveillance in of program situations where large like the and subsequently government analyzing the large amounts is data Baltimore without collecting a warrant, but also where the government seeks access to pre-existing moun- or in the jurisprudence of the Supreme Court or the Second Circuit, that requires such a rule in the context of a search of computers.”) (emphasis in the original). site 2017/08/23/545515159/justice-department-narrows-request-for-visitor-logs-to-in- auguration-protest-webs [https://perma.cc/UB8A-V3Y6]. 360 cornerstone of the First Amendment, and DOJ’s ongoing investiga- NYU tion ANNUAL should be cause for alarm SURVEY to anyone, no matter your OFpolitical party AMERICANor beliefs.” LAW [Vol. 73:323 \\jciprod01\productn\N\NYS\73-2\NYS205.txt unknown Seq: 38 23-MAY-18 7:38 eralized that they provide constitutional protection only in theory, or tests to be performed, but warrants rarely do so. The warrant process is prima- rily concerned with identifying whether United States v. Graziano, 558 F. Supp. 2d 304, 315 (E.D.N.Y. 2008) (“As a thresh- old argument, to the extent that the defendant argues that the warrant is facially overbroad and invalid because it did not require a certain search methodology or limit the search of computers to certain keywords or terms, argument unpersuasive. There is the nothing in the language of the Court finds that though computer technology may in theory justify blanket seizures for the reasons discussed above, the government must still demonstrate to the magistrate why such a broad hand . search . . . and Thus, there must seizure be some needle.’”)the for look threshold to haystack the ‘seize may authority original), the in (emphasis showing before the is government reasonable in re the case at search protocol, i.e., an explanation of the scientific methodology the government will use to separate what is permitted to be seized from what is not, will explain to the Court how the government will decide where it is going thus to search—and squarely it is aimed at Amendment.”) satisfying the particularity requirement (“At the outset, we disagree with [defendant] that the government was of required to the Fourth describe its specific search methodology.”), 532, 537 (1st Cir. 1999) (“The . . . warrant did not prescribe methods of recovery 40268-nys_73-2 Sheet No. 105 Side B 05/23/2018 07:56:14 Side B 05/23/2018 Sheet No. 105 40268-nys_73-2 40268-nys_73-2 Sheet No. 106 Side A 05/23/2018 07:56:14 Jones If con- 189 render the situation all the more urgent. “The Fourth Knotts By developing a categorical exception for law enforcement use While it is true that private companies compile large stores of 189. United States v. Warshak, 631 F.3d 266, 285 (6th Cir. 2010). maintain that what remains private is only what has been cret. kept The se- possibility of drone surveillance to facilitate dragnet law enforcement the practices anticipated by the type court in of and Amendment must keep pace with the inexorable march of techno- logical progress, or its guarantees will wither and perish.” afford the courts a limited, but critical capacity to protect the rights of individuals from unreasonable search and seizure, while preserv- ing First Amendment freedoms to gather and circulate information regarding matters of public concern. Applying the insights of mo- saic theory to cases involving warrantless drone surveillance reveals that any targeted or persistent drone surveillance without a warrant violates the Fourth Amendment prohibition against unreasonable searches. of drones, the Court may ensure robust protection of both Fourth Amendment liberty and privacy interests and the First Amendment freedom to speak and associate freely. In an age where people are increasingly exposed to the public eye, it is no longer tenable to 2018] particularity requirements updated for the digital age must likewise be formulated for warrants to execute drone surveillance. data based on individual and group consumer habits to gain insight into the personal lives of their customer DRONE base REGULATION patterns in of consumption, order tort law to provides predict a framework to analyze the privacy harm where it occurs. But when it comes to protecting individual privacy against the exercise of government authority, the First and Fourth Amendments remain the key sources of law. They 361 \\jciprod01\productn\N\NYS\73-2\NYS205.txt unknown Seq: 39 23-MAY-18 7:38 stitutional principles fundamental to a thriving democracy are to be to are democracy thriving a to fundamental principles stitutional preserved, there must be a reasonable expectation of privacy in the details of our private lives, “knowingly exposed.” even after all information has been 40268-nys_73-2 Sheet No. 106 Side A 05/23/2018 07:56:14 Side A 05/23/2018 Sheet No. 106 40268-nys_73-2