A Puerto Rican Parley: Weekly Brief for June 1

This week, the Supreme Court decided five cases. In Financial Oversight & Mgmt. Bd. for Puerto Rico v. Aurelius Investment, it held that appointments to the board overseeing Puerto Rico’s financial recovery were constitutional. In Banister v. Davis, it concluded that a defendant’s motion under Rule 59(e) of the Federal Rules of Civil Procedure does not count as a “second or successive” habeas petition. In Nasrallah v. Barr, it determined that 8 U.S.C. §1252(a)(2)(C) does not cabin federal appellate courts’ jurisdiction over factual challenges to a finding of removal under the Convention Against Torture. In Thole v. U.S. Bank, it ruled that a certain participant in U.S. Bank’s defined-benefit pension plan lacks standing to sue U.S. Bank for fiduciary misconduct. And in GE Energy Power Conversion France SAS, Corp. v. Outokumpu Stainless USA, LLC, the Court held that the New York Convention does not conflict with equitable estoppel doctrines permitting a nonsignatory to compel arbitration. Here’s your recap of this past week at the Supreme Court.


This Week:
Decisions: 5
Cases Argued: 0
Cert Grants: 0
Opinions Relating to Orders: 1
GVRs: 1

O.T. 2019:
Cases Decided: 41
Cases Remaining: 20*
Weeks Left in Term: 4**

* This number does not include cases that were granted and had been set for oral argument in March or April, but were postponed due to COVID-19 and were not rescheduled for the May virtual argument sitting.

** This number reflects the date at which the Supreme Court’s term usually ends (the last week of June). However, O.T. 2019 may end later due to measures taken in response to COVID-19.



First thing Monday morning, the Court released an orders list from last week’s conference. No new cases were granted. The Court granted, vacated, and remanded Furlow v. United States in light of last term’s decision in Rehaif v. United States.

The Court declined to take up Jarchow v. State Bar of Wisconsin, a Free Speech Clause challenge to a Wisconsin state law that requires all attorneys in the state to be members of the state bar and pay its dues before they can practice law.

Justice Thomas (joined by Justice Gorsuch) dissented, writing a short opinion explaining why he thought the Court should hear the case. Thomas admits that Keller v. State Bar of California (1990) greenlighted state laws that mandate bar membership, like Wisconsin’s. However, Keller relied on Abood v. Detroit Bd. of Ed. (1977), which held that laws requiring public employees to pay union dues do not violate the First Amendment. Abood was overruled by Janus v. AFSCME two terms ago. “Our decision to overrule Abood casts significant doubt on Keller,” Thomas writes. Since Keller relies “almost entirely” on Abood, which is “no longer good law,” there is “effectively nothing left supporting our decision in Keller,” argues Thomas. So, Thomas (and Gorsuch) would have heard Jarchow and reexamined the Court’s holding in Keller. For now, Wisconsin’s law can remain on the books, along with similar laws in 31 other states.


Next the Court issued decisions in five cases:

Thole v. U.S. Bank N.A.
Thole deals with the oft-litigated Employee Retirement Income Security Act of 1974 (ERISA). Some context is necessary before we get to the Court’s decision.

ERISA “protect[s] . . . the interests of participants in employee benefits plans . . . by establishing standards of conduct, responsibility, and obligation for fiduciaries . . . and by providing for appropriate remedies, sanctions, and ready access to the Federal courts” (29 U.S.C. §1001(b)). So, if a fiduciary breaches its obligations and, as a result, loses some of the funds in a participant’s benefit plan, ERISA creates legal remedies for that participant. These include litigation to recover the losses (29 U.S.C. §1132(a)(2)) and the chance to seek a preliminary injunction to stop further fiduciary misconduct (29 U.S.C. §1132(a)(3)).

Here, U.S. Bank offered a retirement plan, in which Mr. Thole (and the other plaintiff) participated. In 2007, the plan’s assets were worth $2.8 billion. But U.S. Bank invested the entirety of those assets in high-risk equities and, a year later, the 2008 Recession hit. The pension plan lost $1.1 billion—39.2% of the plan’s total assets. Had the plan been appropriately diversified, it would have lost only 32% of that amount, or $748 million less. The crash left the plan reeling: before, it was overfunded; after, it was 84% underfunded. Thole then sued U.S. Bank, seeking both an injunction against the bank’s plan investment practices and restoration of the $748 million.

While the suit played out, U.S. Bank poured $339 million back into the plan, returning the plan’s status to “overfunded.” Armed with this information, the district court dismissed Thole’s suit, and the Eighth Circuit Court of Appeals affirmed. Following circuit precedent, the Eighth Circuit held that Thole had not suffered an individual financial loss, and thus he was not entitled to the restoration of the $748 million. It further dismissed his claim for injunctive relief. Thole appealed to the Supreme Court, arguing that he has standing to seek injunctive relief and restoration of all of the plan’s $748 million losses.

But Justice Kavanaugh, writing for a 5:4 majority, disagreed. (He was joined by Chief Justice Roberts and Justices Thomas, Alito, and Gorsuch.) To establish standing, a plaintiff must demonstrate three things: (1) “that he or she suffered an injury in fact that is concrete, particularized, and actual or imminent”; (2) “that the injury was caused by the defendant”; and (3) “that the injury would likely be redressed by the requested judicial relief” (citing Lujan v. Defenders of Wildlife (1992)). Each is a necessary condition to establish standing, but failing to meet just one prong is sufficient to dismiss a suit. Unfortunately for Mr. Thole, he fails to satisfy even the first prong since he has suffered no “injury,” Kavanaugh holds.

U.S. Bank’s retirement plan is a defined-benefit plan. This means that Thole is guaranteed a certain monthly payment for the rest of his life. The amount will never fluctuate (as opposed to a defined-contribution plan, like a 401(k)), no matter the nature of U.S. Bank’s investment plans. Accordingly, Thole has received the same pension benefit each month since he joined U.S. Bank’s plan. The amount he’s received has never changed—including during the 2008 Recession—and U.S. Bank has never missed a payment. Per the plan’s terms, U.S. Bank is contractually obligated to pay Thole the same amount each month for the rest of his life.

So, Thole (and the other plaintiff) has not suffered any monetary injury at all on the part of U.S. Bank. Thus, Thole fails to meet the first standing prong above. (He also fails to meet the second, since he has not identified any “injury” he suffered because of U.S. Bank’s actions.) Kavanaugh further points out that the outcome of Thole’s class-action suit will have absolutely no effect on him whatsoever. Were he to lose—that is, U.S. Bank would not have to restore all $748 million—he would continue to receive the same monthly pension benefit as he has been receiving. Were he to win—that is, U.S. Bank would have to restore all $748 million—he would still receive the same monthly pension benefit. Thole “therefore [has] no concrete stake in this lawsuit,” Kavanaugh argues. (This would seem to implicate the third standing prong, since, assuming arguendo that Mr. Thole was “injured,” the judicial relief Thole requests would have no effect on him.)

Kavanaugh then turns to rebutting Thole’s objections. First, Thole claimed he has standing simply by virtue of the fact that he is a representative of the pension plan. But Hollingsworth v. Perry (2013) forecloses this argument, Kavanaugh replies. To claim “the interests of others,” the Hollingsworth Court said, “the litigants themselves still must have suffered an injury in fact, thus giving” them “a sufficiently concrete interest in the outcome of the issue in dispute.” And, as Kavanaugh demonstrated earlier, Thole has suffered no such injury and has no such interest.

Next, Thole argued that ERISA implicitly contains an exception to the normal standing requirements. Since ERISA gives Secretaries of Labor, fiduciaries, participants, and beneficiaries a basic cause of action to sue for fiduciary misconduct, Thole claimed he has a statutory right to sue U.S. Bank because it purportedly mismanaged its pension plan. But the conclusion does not follow from the premise, Kavanaugh replies. True, ERISA creates a statutory right to sue for fiduciary misconduct, but this in no way alters a plaintiff’s standing requirements. As the Court held in Spokeo, Inc. v. Robins (2016), “a plaintiff [does not] automatically satisf[y] the injury-in-fact requirement” simply because a statute “grants a person a statutory right and purports to authorize that person to sue to vindicate that right.”

Finally, Thole also sought attorney’s fees, which amounted to $31 million in the district court alone. But while it’s true that Thole’s attorneys may have a stake in the outcome of this lawsuit, this does not, ipso facto, give Thole standing to sue. An “interest in attorney’s fees is, of course, insufficient to create an Article III case or controversy where none exists on the merits of the underlying claim,” Kavanaugh notes (quoting Lewis v. Continental Bank Corp. (1990)).

For these reasons, Kavanaugh holds that Thole does not have standing to sue and affirms the Eighth Circuit’s dismissal. It may be the case that U.S. Bank mismanaged its entire pension plan in the run up to the 2008 Recession and therefore “injured” other participants in the plan. If so, they might have standing to sue. But this isn’t the case for Mr. Thole.

Justice Thomas (joined by Justice Gorsuch) penned a short concurrence. He fully agrees with Kavanaugh’s opinion. Thomas simply wants to devote more ink to rebutting a trust-law argument for standing advanced by Thole, as well as opine on what such an argument would mean for the Court’s standing precedents.

Justice Sotomayor (joined by Justices Ginsburg, Breyer, and Kagan) dissented in an opinion thrice the length of Kavanaugh’s. She begins with a Hohfeldian reading of ERISA. The statute gives prospective (public) retirees a right to participate in their employers’ retirement plans. So, the employers have a corresponding statutory duty to “act prudently and loyally” toward the plan’s management and toward its participants. (Sotomayor also says this duty derives from the common law of trusts.) If an employer violates that duty, ERISA confers a right to sue on the plan participant.

With this in mind, Sotomayor moves to the question of standing. She concludes Thole can bring his suit for three reasons. First, she argues that Thole has an “equitable interest” in the integrity of U.S. Bank’s pension plan, a status that is “typically” sufficient to establish standing under the common law of trusts. Second, Sotomayor argues that Thole has met the first standing prong (suffering an “injury”). Even though Thole has not (and will not) suffer any financial injury, the fact that U.S. Bank (allegedly) mismanaged its pension fund is, in and of itself, a “cognizable” injury. Third, the plan itself has been injured (since it lost $748 million in 2008), and ERISA allows Thole to intervene on the plan’s behalf.

Nasrallah v. Barr
The second majority opinion of the day also came from Justice Kavanaugh. This time, it was in an arcane immigration procedure case. Kavanaugh holds that 8 U.S.C. §1252(a)(2)(C) does not prevent a federal appellate court from entertaining an immigrant’s factual challenges to a Convention Against Torture removal order. Chief Justice Roberts and Justices Ginsburg, Breyer, Sotomayor, Kagan, and Gorsuch agreed.

Under current immigration law, noncitizens who commit certain crimes may be removed from the United States. During removal proceedings, a noncitizen may raise a defense against removal under the Convention Against Torture (CAT). Specifically, if the noncitizen demonstrates a likelihood that he would be tortured in the country to which he would be removed, the CAT prohibits the U.S. from removing him to that particular country.

The process for CAT relief begins in immigration court. If a noncitizen who is eligible for removal raises a CAT defense, the immigration judge must make a finding on both the final removal order and potential CAT relief. (In other words, the judge might determine that the immigrant must be removed; that the immigrant qualifies for CAT relief; and therefore that the immigrant must be removed to a different country than the one designated for removal.) If an immigration judge rules against a noncitizen on either order, the noncitizen may appeal to the Board of Immigration Appeals (BIA). If the BIA affirms, the noncitizen may appeal to the relevant federal court of appeals.

Assuming you have all that straight, let’s add another dimension to this case. If the noncitizen has committed any of the crimes listed in 8 U.S.C. §1252(a)(2)(C), the grounds on which he can appeal the BIA’s decision to the federal appellate court are limited—at least, insofar as the final removal order is concerned. Specifically, the noncitizen can raise legal or constitutional challenges to the final removal order, but not factual challenges. But what about the CAT order? Does §1252(a)(2)(C) limit the scope of federal appellate review to only legal and constitutional challenges to the CAT order too?

That complex, esoteric question is the exact question presented here in Nasrallah. Justice Kavanaugh, ruling for the immigrant, answers “no”; §1252(a)(2)(C) does not prohibit the federal appellate court from hearing factual challenges to a CAT order.

First, Kavanaugh makes clear that a CAT order is not the same as a final removal order. The latter is an order “concluding that the alien is deportable or ordering deportation” (8 U.S.C. §1101(a)(47)(A)). The former is not. It simply indicates whether or not the noncitizen can be deported to the designated country based on torture concerns.

Now, one might argue that since a CAT order does have something to do with removability, it should fold into the immigration court’s final removal order. In other words, just as, “say, an immigration judge’s evidentiary rulings merge into final orders of removal,” shouldn’t CAT orders merge into final orders of removal too? Kavanaugh answers no. As the Court recognized in INS v. Chadha (1983), review of a final order of removal “includes all matters on which the validity of the final order is contingent.” “But,” Kavanaugh argues, “the immigration judge’s or the Board’s ruling on a CAT claim does not affect the validity of the final order of removal and therefore does not merge into the final order of removal.” The government’s contrary interpretations (and policy arguments) are unavailing.

Justice Thomas (joined by Justice Alito) dissented. Thomas zeroes in on a neighboring immigration provision, 8 U.S.C. §1252(b)(9). This “zipper provision” says that “[j]udicial review of all questions of law and fact . . . arising from any action taken or proceeding brought to remove an alien from the United States . . . shall be available only in judicial review of a final order under this section.”

What gets Thomas is the phrase, “arising from.” Using the phrase’s dictionary definition, Thomas thinks the zipper provision “covers all ‘questions of law and fact’ that an immigration judge must decide as a result of the Government’s decision to initiate removal proceedings against an alien” (citing Reno v. American-Arab Anti-Discrimination Comm.(1999)). Turning to the CAT order, Thomas contends that the zipper clause encompasses a judge’s findings on CAT relief. After all, the noncitizen applied for CAT relief only after the U.S. began removal proceedings against him. So, the argument goes, the CAT order “ar[ose] from a[] . . . proceeding brought to remove an alien from the United States.” So, judicial review of all legal or factual questions concerning CAT relief “shall be available only in judicial review of a final order under this section.” And since §1252(a)(2)(C) limits the scope of that review to legal or constitutional questions—not factual questions—§1252(a)(2)(C) precludes judicial review of factual challenges to a CAT order, Thomas concludes.

Banister v. Davis
The next opinion came from Justice Kagan in a complex civil procedure case. Some context is necessary.

Gregory Banister, a Texas inmate, was charged and convicted of aggravated assault with a deadly weapon after he struck and killed a bicyclist with his car. At trial, the prosecution introduced a blood draw indicating Banister had cocaine in his system when he committed the crime. Banister didn’t consent to the blood draw.

After his conviction, Mr. Banister filed a habeas corpus petition in federal court, arguing that his trial counsel was ineffective because he failed to challenge the admissibility of the blood draw. The district court denied his petition and did not allow him to appeal its decision to the Fifth Circuit. Under the Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA), Banister is ordinarily not allowed to file a “second or successive” habeas petition (28 U.S.C. §2244(b)).

Undeterred, Banister found another way. Under the Federal Rules of Civil Procedure, a litigant can file a motion to “alter or amend” a district court’s judgement “no later than 28 days after the entry of the judgment” (Rule 59(e)). Rule 59(e) motions are usually filed when the applicant thinks the district court made an error in judgment, and this is exactly what Banister argued (and he did so within the 28 day window).

The district court denied Banister’s Rule 59(e) motion on the merits. On appeal, the Fifth Circuit denied it procedurally. It held that Banister’s Rule 59(e) motion was, in essence, a “second or successive” habeas petition proscribed by the AEDPA. Banister appealed to the Supreme Court, asking the Justices to decide whether a timely Rule 59(e) motion is a “second or successive habeas petition” under the AEDPA.

Justice Kagan, writing for a 7:2 majority, answers “no,” reversing the Fifth Circuit’s decision. (Chief Justice Roberts and Justices Ginsburg, Breyer, Sotomayor, Gorsuch, and Kavanaugh joined in her opinion.)

To begin, Kagan discusses the nature of the two operative rules at play. First, Rule 59(e) applies in federal civil litigation in general. It allows the applicant to ask a district court to reconsider a just-issued ruling. It must be filed within 28 days of the ruling, and it instructs the court to reexamine its decision on the merits of the case. It does not allow the applicant to raise new issues or defenses. Second, §2244(b)—the AEDPA provision—prohibits state prisoners from filing “second or successive” federal habeas petitions (with a few exceptions). This “gatekeeping” provision swings open for a second habeas petition only in rare instances, where the petitioner is able to meet several procedural requirements.

Kagan then turns to the merits of the case. The question is essentially whether a Rule 59(e) motion counts as a “second or successive” habeas petition. “Second or successive” is a “term of art,” writes Kagan, and it is not defined in the AEDPA. To discern its meaning, Kagan looks to prior caselaw and statutory purpose.

Kagan first finds that the Court’s historical precedents support the notion that a Rule 59(e) motion is not a second or successive habeas petition. In Browder v. Director, Dept. of Corrections of Ill. (1978)—decided prior to the AEDPA’s enactment—the Court held that Rule 59(e) motions were valid procedural moves in habeas proceedings. [W]hen Congress enacted the AEDPA in 1996, it “did nothing to change” this “legal backdrop,” Kagan writes. “[T]he [AEDPA] did not redefine what qualifies as a successive petition, much less place Rule 59(e) motions in that category.” Further, it is common practice that if Congress wants to change a Court’s holding by enacting a new statute, it does so by writing into the statute express language to that effect. But the AEDPA “offers no such indication that Congress meant to change the historical practice Browder endorsed of applying Rule 59(e) in habeas proceedings,” Kagan points out.

Next, Kagan concludes that the AEDPA’s purpose still allows for Rule 59(e) motions. The statute was designed to guard against “serial challenges to a judgment of conviction, in the interest of reducing delay, conserving judicial resources, and promoting finality,” she writes. But Rule 59(e) “does not conflict[] with those goals.” It puts defendants on a short, 28-day clock that admits of no exceptions. It prohibits defendants from raising claims or defenses that were not previously argued (a form of res judicata). In short, it merely serves as a mistake-fixing apparatus. If a defendant thinks the district court erred in its judgment or reasoning, Rule 59(e) allows for a reexamination of the matter to ensure a “single final judgment for appeal.” As the Browder Court noted, Rule 59(e) is “based on an interest in speedy disposition and finality.”

It appears the dissent—penned by Justice Alito and joined by Justice Thomas—does not object to most of this (though it does offer some contrary readings of Browder). What Alito homes in on is Gonzalez v. Crosby (2005). There the Court debated a very similar question to the one here: whether a Rule 60(b) motion counts as a “second or successive” habeas petition. (A Rule 60(b) motion seeks relief from a final judgment or order.) The Gonzalez Court held that it could. Specifically, if a Rule 60(b) motion “attacks the federal court’s previous resolution of a claim on the merits“—that is, raises a new “claim”—it operates effectively as a “second or successive” habeas petition and is barred under the AEDPA (emphasis in original). Conversely, if the motion “attacks, not the substance of the federal court’s resolution of a claim on the merits, but some defect in the integrity of the federal habeas proceedings,” it is not a second or successive habeas petition.

Alito thinks Gonzalez should control this case. Quoting White v. New Hampshire Dept. of Employment Security (1982), Alito points out that a Rule 59(e) motion “can seek only ‘reconsideration of matters properly encompassed in a decision on the merits.'” How, then, can a Rule 60(b) motion fail and a Rule 59(e) motion pass under Gonzalez?

Kagan’s majority opinion offers a few responses. For example, she says the common law history behind Rules 59(e) and 60(b) are different (Alito objects to its relevance under Gonzalez). And she says that Rule 60(b) motions do not possess the same “speedy-resolution” character as do Rule 59(e) motions—and thus would not comport with the statutory purpose of the AEDPA (to which Alito has no response).

In any event, Kagan holds that a Rule 59(e) motion does not count as a “second or successive” habeas petition under the AEDPA, handing Mr. Banister a win.

Financial Oversight & Mgmt. Bd. for Puerto Rico v. Aurelius Investment, LLC
The fourth decision of the week was also the longest. Justice Breyer, for a unanimous Court, holds that the Appointments Clause of the Constitution does not invalidate the Obama administration’s appointments to the Financial Oversight and Management Board for Puerto Rico.

In 2016, Puerto Rico was in dire financial straits. Congress responded with the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA). PROMESA created the Financial Oversight and Management Board for Puerto Rico (“the Board”), whose task was to get the federal territory back on its financial feet. Under PROMESA, the president gets to choose the Board’s seven members. The statute does not provide for their confirmation by the Senate.

After President Obama selected the seven members and the Board began its financial cleanup work, Aurelius Investment LLC sued. It claimed that the Board members were subject to the Constitution’s Appointments Clause and needed to undergo Senate confirmation. Since they hadn’t, the argument went, they were working in an illegal capacity. In response, the Board (and the federal government) argued that the Board members were not “officers of the United States”—i.e., an officer who works for the federal government—but rather a “local officer” working for the territory of Puerto Rico; and that the Constitution’s Appointments Clause extends only to “officer[s] of the United States,” not to local officers too.

Justice Breyer, writing for a unanimous Court, sides with the Board and holds that the Appointments Clause does not extend to the Board members. First, Breyer discusses the nature of the Appointments Clause itself. It reads, as relevant, that the President “shall nominate, and by and with the Advice and Consent of the Senate, shall appoint . . . all [] Officers of the United States, whose Appointments . . . shall be established by Law” (Art. II §2, cl.2). The first question, then, is whether the Clause applies to federal territories—like Puerto Rico—at all. If not, then the case is already closed.

Breyer finds that it does. History is his main support. At the dawn of the Republic, Congress’ Northwest Ordinance provided for the appointment of officers to govern the Northwest Territory. After the Constitution’s ratification, early Congresses passed similar statutes creating officers for several U.S. territories. Breyer finds nothing in the text of the Constitution or prior caselaw to suggest that the Appointments Clause was not intended to apply to Congressionally-created, territorial officers. Thus, at base, the Appointments Clause extends to “officers of the United States,” including those who are territorial are whose officers were created by Congress.

With this in mind, let’s return to the Board. It was created by Congress, and it operates in a federal territory (Puerto Rico). Thus, the “more difficult” question presented by this case, Breyer says, is whether the Board members qualify as “officers of the United States.” The text is ambiguous; nowhere in the Constitution is the phrase “officers of the United States” defined. But, again, history does shed some light. As we just saw, Congress has long exercised its authority to establish territorial officers. But a distinction arises: sometimes, of course, those officers are empowered to carry out the authority of the federal government. Other times, those officers are empowered to carry out only local duties. For example, Breyer notes 13 instances in which Congress created legislatures or local law enforcement offices for federal territories. From the Northwest Ordinance in 1787 to enactments for D.C. and Guam in the past few decades, Congress has created certain offices for wholly local purposes and shouldered their officers with wholly local duties.

To Breyer, then, the question is whether the Puerto Rico Board’s members are tasked with primarily local duties. If they are, then the Appointments Clause does not apply to their appointments because they are not true “officers of the United States.” If they do not have only local duties, then the Appointments Clause applies.

Breyer concludes that they are primarily local officers. He first notes that PROMESA describes the Board as “an entity within the territorial government,” and says that it “shall not be considered a department, agency, establishment, or instrumentality of the Federal Government.” So we know that Congress intended the Board to carry out primarily local duties; did it succeed? Breyer thinks so. The Board’s “structure,” its “set of duties,” and its “related powers” all confirm this. Its members are paid by Puerto Rico, not the federal government. It has investigatory power, but only insofar as Puerto Rican entities are concerned. It can enforce subpoenas, but only within Puerto Rican courts. Finally, the Board works closely with the Puerto Rican government to create and implement financial recovery plans. But all of its powers are subject to the laws of Puerto Rico, and all of its actions are coordinated with Puerto Rico; not the federal government. In fact, the only relationship the Board has with the federal government is its statutory origin. True, certain of the Board’s actions “may have nationwide consequences,” Breyer admits. “But the same can be said of many actions taken by many Governors or other local officials.” Moreover, “taking actions with nationwide consequences does not automatically transform a local official into an ‘Officer of the United States,'” Breyer points out. In short, the Board retains “considerable” power—but only within the jurisdiction of Puerto Rico. Its activities are concerned “primarily with local matters,” and its members have “primarily local duties.”

Thus, Breyer concludes that the Appointments Clause does not apply to the members of the Financial Oversight and Reform Board for Puerto Rico. While the Appointments Clause may govern appointments to Congressionally-created, territorial officers, those officers must be of “the United States,” carrying out nonlocal, federal duties. The “officers” on Puerto Rico’s Board do not qualify. Breyer has no need to consider additional arguments raised by Aurelius—such as whether any of the Board’s actions should be annulled, or whether to overrule the “much-criticized” Insular Cases of 1901 and their progeny—since they were contingent on the opposite holding.

Justice Thomas authored an 11-page opinion concurring in the judgment. He ultimately agrees that the Board’s members are not subject to the Appointments Clause. But rather than rely on whether an officer’s duties are primarily local in nature (as Breyer does), Thomas relies on an originalist reading of the phrase, “officers of the United States.”

To Thomas, that phrase is defined as “all federal civil officials who perform an ongoing, statutory duty” (as he wrote in Lucia v. SEC (2018)). But “[t]erritorial officers” whose duties are performed pursuant to Article IV do not qualify, for two reasons. First, agreeing with Breyer, Thomas argues that such officers are not officers of the United States based on a plain textual reading of the Appointments Clause. Second, going further than Breyer, Thomas argues that the practices of the First Congress are dispositive in understanding why. In establishing the government of the Northwest Territory, the First Congress distinguished national powers from territorial powers. It “understood that officers performing duties pursuant to only Article IV territorial powers are not officers ‘of the United States.'” There is no indication that Congress sought to change this framework when it adapted the Northwest Ordinance to the Constitution, Thomas further notes. So, since the Puerto Rican Board meets all of the qualifications for a territorial, Article IV actor, Thomas agrees that its members are not subject to the Appointments Clause.

Finally, Justice Sotomayor—of Puerto Rican descent—concurred in the judgment in a 24-page opinion. In short, Sotomayor affords more weight to the sovereignty of Puerto Rico than do her colleagues. In 1950, Congress enacted the Puerto Rico Federal Relations Act (or “Public Law 600”), ratifying the Puerto Rican Constitution. With that statute (along with Puerto Rico’s subsequent referendum), Sotomayor says, “the United States and Puerto Rico . . . forged a unique political relationship, built on the island’s evolution into a constitutional democracy exercising local self-rule” (quoting Puerto Rico v. Sánchez Valle (2016)). Therefore, “the authority ‘to choose [Puerto Rico’s] own officers for governmental administration’ now seems to belong to the people of Puerto Rico,” she argues (quoting In re Duncan (1891)).

Sotomayor does not engage with the merits of either Breyer’s majority opinion or Thomas’ concurrence. Instead, she suggests that Puerto Ricans alone—not Congress—have the power to establish officers whose duties encompass only Puerto Rican affairs. In Sotomayor’s book, the Puerto Rico Financial Board’s officers need not undergo Senatorial confirmation, irrespective of whether they are “territorial” or “local” officers as opposed to officers “of the United States.” Indeed, that appears to be a moot point. But her explanation as to why relies neither on the nature of the officers’ work nor on Constitutional interpretation. Rather, it relies on the nature of Puerto Rico and its sovereignty. In a striking paragraph, Sotomayor writes:

At a minimum, the post-[Public Law 600] developments, including this Court’s precedents, indicate that Congress placed in the hands of the Puerto Rican people the authority to establish their own government, replete with officers of their own choosing, and that this grant of self- government was not an empty promise. That history prompts serious questions as to whether the Board members may be territorial officers of Puerto Rico when they are not elected or approved, directly or indirectly, by the people of Puerto Rico.

To Sotomayor, the Board’s members exist in a “twilight zone.” They are “neither selected by Puerto Rico itself nor subject to the strictures of the Appointments Clause.” She questions whether Congress even has the authority to establish principally territorial officers in Puerto Rico. In an appropriate case, Sotomayor would take up that issue. But since this case did not raise it, she “reluctantly” concurs in the majority’s conclusion.

To recap: The Court unanimously holds that the appointments made to the Financial Oversight and Management Board for Puerto Rico did not violate the Appointments Clause. A majority of the Court (led by Justice Breyer) said it was because the Board’s members exercised principally “local” duties. Justice Thomas said it was because of the “original public meaning” of the phrase, “officers of the United States” in the Appointments Clause. And Sotomayor, largely skeptical of the entire conclusion, questions whether Congress even has the authority to create “territorial” officers within Puerto Rico.

GE Energy Power Conversion France SAS Corp. v. Outokumpu Stainless USA, LLC
This case wins the award the term’s Longest Case Name.

More importantly, the case concerns contract law and arbitration procedure. The question presented is this: Does the 1959 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) preclude a nonsignatory from compelling arbitration under the domestic doctrine of equitable estoppel. Justice Thomas, writing for a unanimous Court, answers “no.” (Get ready for a boring case—no offense to the parties involved.)

If you read that holding and thought, “I have absolutely no clue what that means,” this paragraph will help. (Those well-versed in arbitration and contract law can skip it.) In 2007, ThyssenKrupp Stainless USA (whose manufacturing plant was later bought by Outokumpu Stainless) entered into three manufacturing contracts with F. L. Industries, Inc. (who later subcontracted with GE Energy). Outokumpu Stainless sought GE Energy’s motors so that it could use them in the machines in its manufacturing plant. In 2015, those motors allegedly failed, causing significant financial and property damage. Outokumpu Stainless sued GE Energy. GE Energy promptly tried to replace litigation with arbitration, relying on the three original contracts (which provided for arbitration) between ThyssenKrupp Stainless and F. L. Industries. Even though GE Energy did not sign any of those contracts, it argued that a longstanding legal doctrine—”equitable estoppel”—allowed it to invoke and enforce the arbitration agreements in those contracts. But the Eleventh Circuit Court of Appeals disagreed. It pointed to the 1959 New York Convention (which is part of international trade law). According to the Eleventh Circuit, the New York Convention allowed only signatories to arbitration agreements to replace litigation with arbitration (or “force/compel arbitration”). So, since GE Energy was not a signatory to the three original contracts, the New York Convention barred it from forcing arbitration. GE Energy appealed to the Supreme Court, asking the Justices to decide whether the New York Convention conflicts—and thus supersedes—the doctrine of equitable estoppel.

Thomas, in answering “no,” begins by surveying both the state-law origins of equitable estoppel and federal arbitration law. In the arbitration context, equitable estoppel “allows a nonsignatory to a written agreement containing an arbitration clause to compel arbitration where a signatory to the written agreement must rely on the terms of that agreement in asserting its claims against the nonsignatory,” Thomas writes (citation omitted). And in Arthur Andersen LLP v. Carlisle (2009), the Court affirmed that Chapter 1 of the Federal Arbitration Act allows nonsignatories to compel arbitration on equitable estoppel grounds.

Next, Thomas turns to the New York Convention (to which the U.S. is party). An international treaty, the Convention deals almost entirely with arbitral awards. In fact, only one of its sections (Section II) actually concerns arbitration agreements.

The question, then, is whether any of the provisions within Section II of the New York Convention conflict with the doctrine of equitable estoppel. Thomas doesn’t think so. To start, the Convention is utterly silent on the issue of nonsignatories compelling arbitration. Only one provision—Section II(3)—has any bearing on this case at all. Thomas paraphrases the section in part: U.S. courts “‘shall . . . refer the parties to arbitration’ when the parties to an action entered into a written agreement to arbitrate and one of the parties requests referral to arbitration.”

So, what does Section II(3) actually say? It merely says that if two parties enter into an arbitration agreement, and one party moves to compel arbitration during litigation, the court must shift the parties to arbitration. (This is a straightforward, commonsense principle of arbitration law.) Again, there’s nothing on the issue of nonsignatories compelling arbitration. Moreover, nothing in Section II(3)—much less anything else in the New York Convention—says anything at all about limiting or superseding state-law arbitration doctrines (like equitable estoppel). In other words, Section II(3) does provide instruction in one particular arbitration situation (i.e., signatories compelling arbitration pursuant to the terms of a contract). But it provides no instruction in other arbitration situations, “leaving that matter to domestic law,” Thomas says. Finally, if you were to consult either the drafting history of the Convention or the way in which other countries have interpreted the Convention post-ratification, you’d find only more support for this conclusion, Thomas says (providing examples).

Thus, Thomas concludes that a nonsignatory may move to force arbitration under current doctrines of equitable estoppel, and the New York Convention does not say otherwise.

Justice Sotomayor penned a brief concurrence. Sotomayor fully agrees with the majority; she simply adds a few words on the doctrinal limits of equitable estoppel. Even though the doctrine permits nonsignatories to compel arbitration, its use must still reflect the principle of “consent, not coercion” (quoting Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ. (1989)). In other words, even though nonsignatories can seek to compel arbitration, the opposing party must still consent to it. If the opposing party declines and wants to continue with litigation, litigation will continue. With arbitration, equitable estoppel gives nonsignatories the privilege to seek it, not the power to compel it.


The Court held no proceedings on Tuesday and Wednesday.


Thursday evening, Justice Sotomayor put on hold a district court’s order to grant compassionate release to some 800 federal prisoners in Ohio out of COVID-19 concerns. The case first came before the Court last week after the Trump administration asked the Court to put the district court’s preliminary findings on hold. The Court dismissed the administration’s request, but largely on procedural grounds. The district court had issued a subsequent enforcement order, which the administration had not appealed. It did so this time, and Sotomayor granted the request. The inmates will remain in prison at least until the Sixth Circuit Court of Appeals rules on the merits of the case.

In addition, the Court conducted its weekly, private (tele-)conference on Thursday. The Justices reviewed the petitions on their docket and debated whether to grant review for any of them. Out of an abundance of caution, only Chief Justice Roberts was actually present in the Supreme Court building; the other eight Justices took part in the conference over the phone. We can expect news from this conference in the Court’s orders list next Monday. Some high profile cases the Justices are considering include:

  • Box v. Planned Parenthood of Indiana & Kentucky, Inc. This case challenges an Indiana state abortion law that requires women who seek an abortion to, among other things, undergo a fetal ultrasound eighteen hours before the abortion is performed. The question presented is whether such an ultrasound requirement violates a woman’s Fourteenth Amendment rights.
  • Arlene’s FlowersInc. v. Washington. This case is a mirror-image to that of Masterpiece CakeshopLtd. v. Colorado, on whose merits the Court punted in 2018. The questions before the Court are (1) whether a state violates a floral designer’s Free Exercise and Free Speech rights by forcing her to create custom floral arrangements celebrating same-sex weddings or by acting based on hostility toward her religious beliefs; and (2) whether the Free Exercise Clause’s prohibition on religious hostility applies to the executive branch.
  • United States v. California. This case involves the Trump administration’s challenge to California’s statewide “sanctuary” law. The law prohibits state law-enforcement officers from providing information about immigrants (both legal and illegal) to federal immigration officials. The question before the Court is whether federal immigration law preempts California’s sanctuary law—and others like it in cities and states around the country—under the Supremacy Clause of the Constitution.
  • Worman v. Healey. This case concerns a Massachusetts state law that bans, inter alia, semiautomatic “assault weapon[s]” and magazines capable of accepting 10+ rounds of ammunition. The question presented is whether that law violates the Second Amendment to the Constitution.
  • Malpasso v. Pallozzi. This is a constitutional law case asking whether a state law that categorically prohibits residents from carrying handguns outside the home for self-defense violates the Second Amendment.
  • Zadeh v. Robinson. This is one of several “qualified immunity” cases before the Supreme Court. The doctrine of qualified immunity applies in lawsuits against federal officials where the actions in question are discretionary actions performed within the exercise of their official duties. The doctrine has become contentious in cases where police are charged with using excessive force.
  • Ohio v. Ford. This is a capital case that asks what the proper standard is for determining whether a criminal defendant is “intellectually disabled” under the Eighth Amendment’s Cruel and Unusual Punishment Clause.
  • McKesson v. Doe. This is a First Amendment case stemming from a Louisiana protest in which some protesters resorted to violence. The question presented is whether the First Amendment bars a state from suing the leader of the protest for criminal negligence where the leader did not necessarily promote or instigate the violence.
  • Reisman v. Associated Faculties of the University of Maine. This case mixes labor unions with the Free Speech Clause of the First Amendment. The question presented is whether it violates the First Amendment to designate a labor union to represent and speak on behalf of public-sector employees who object to its advocacy.
  • Territory of Guam v. Davis. This case concerns a unique Fifteenth Amendment challenge to a political referendum Guam undertook under the 2000 Plebiscite Law. The federal territory allowed only “native inhabitants of Guam” to vote on the island’s future political status with the United States. The question presented is whether the Fifteenth Amendment permits Guam to invite only “native inhabitants of Guam” to participate in a potential political-status plebiscite that would yield only a nonbinding, symbolic expression of self-determination preferences.
  • Collins v. Mnuchin. This case concerns a constitutional challenge to the structure of the Federal Housing Finance Agency (FHFA), a mirror-image case to that of Seila Law v. CFPB, the challenge to the structure of the Consumer Financial Protection Bureau. The questions presented in Collins are (1) whether the structure of the FHFA violates the separation of powers, and if so (2) whether the actions of the FHFA must be annulled and the statute creating its structure struck down.

The Court held no proceedings on Friday.

The Week Ahead

Next week should mirror this week. On Monday, the Court will release orders at 9:30am EDT, and there is a possibility of opinions at 10:00am. On Thursday, the Court will conduct its weekly conference.

Photo Credits: CFO.com.

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