Whether the district court erred by directing that petitioner's federal sentence be served consecutively to a state sentence that had not yet been imposed.
The opinion of the court of appeals (Pet. App. 4a-5a) is not published in the Federal Reporter but is reprinted in 310 Fed. Appx. 681.
The judgment of the court of appeals (Pet. App. 6a) was entered on February 18, 2009. A petition for re hearing was denied on April 13, 2009 (Pet. App. 7a-8a). The petition for a writ of certiorari was filed on May 19, 2009. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1).
Following a guilty plea in the United States District Court for the Northern District of Texas, petitioner was convicted of being a felon in possession of a firearm, in violation of 18 U.S.C. 922(g)(1). He was sentenced to 24 months of imprisonment, to be followed by three years of supervised release. Pet. App. 1a-3a. The court of ap peals affirmed. Id. at 4a-5a.
1. On December 12, 2007, petitioner pawned a Rem ington .270-caliber bolt-action rifle at Wild Bill's Pawn Shop in Abilene, Texas. When he returned the following day and attempted to retrieve it, he falsely stated on an ATF Form 4473 that he had never been convicted of a felony. In fact, he had previously been convicted in Texas state court of the felony offense of criminal mis chief. The pawnshop employee refused to allow petition er to redeem the weapon. Three days later, the Calla han County Sheriff's Office received a call from peti tioner's grandmother advising that petitioner had taken her husband's deer rifle and pawned it in Abilene. Peti tioner ultimately admitted to Abilene police officers that he had pawned the weapon, but suggested that he had permission from his grandmother to do so. Presentence Report ¶¶ 8-20 (PSR).
2. A federal grand jury sitting in the Northern Dis trict of Texas returned a three-count indictment charg ing petitioner with being a felon in possession of a fire arm, in violation of 18 U.S.C. 922(g)(1); possession of a stolen firearm, in violation of 18 U.S.C. 922(j); and mak ing a false statement to a federal firearms dealer, in vio lation of 18 U.S.C. 922(a)(6). Pursuant to a writ of ha beas corpus ad prosequendum, petitioner was tempo rarily released from state custody on unrelated state charges to face the federal charges. PSR ¶¶ 1-2.
Pursuant to the terms of a written plea agreement, petitioner pleaded guilty to the felon-in-possession charge and the remaining charges were dropped. PSR 1 & ¶¶ 4-6. The PSR recommended an advisory Sen tencing Guidelines range of 18-24 months. PSR ¶¶ 26- 27, 31-32, 75.
The PSR noted that petitioner faced a pending pro bation revocation for the offense of criminal mischief in Taylor County, Texas (Case No. 8223D), as well as three pending state charges in Taylor County for assault, forgery, and illegal dumping. PSR ¶¶ 77-78. The PSR noted that under Fifth Circuit precedent, the district court had the discretion to impose a sentence consecu tive to any sentence that might be imposed on the state charges. PSR ¶ 76 (citing United States v. Brown, 920 F.2d 1212 (5th Cir.) (per curiam), cert. denied, 500 U.S. 925 (1991)). Petitioner preserved an objection to that practice. Pet. App. 10a-11a; Pet. PSR Resp.; PSR Ad dendum.
The district court sentenced petitioner to 24 months of imprisonment, to be followed by three years of super vised release. The court provided that the sentence would run consecutively to any future state sentences imposed on the charges then pending in Taylor County. Pet. App. 3a, 12a.
3. The court of appeals affirmed summarily, in an unpublished, per curiam decision. Pet. App. 4a-5a (cit ing Brown, 920 F.2d at 1216-1217).
Petitioner contends (Pet. 5-14) that this Court's re view is warranted because the courts of appeals are di vided over whether a district court has the authority to direct that a sentence run consecutively to a state sen tence that has not yet been imposed. The government agrees with petitioner that district courts lack such au thority under 18 U.S.C. 3584(a). Nevertheless, for two reasons, further review in this case is not warranted to resolve the circuit conflict on that issue. First, the issue lacks real significance, because as a practical matter, state courts and the Federal Bureau of Prisons (BOP) can reach their own decisions about crediting service in another sovereign's correctional system, irrespective of whether Section 3584(a) authorizes federal district courts to embody such decisions in a judgment of convic tion and sentence. Consistent with that conclusion, this Court has denied numerous petitions raising the issue. Second, any need for this Court to resolve the circuit conflict is diminishing: the issue is under active re-ex amination in the courts of appeals, and in the meantime all federal prosecutors have been directed to urge sen tencing courts not to impose consecutive-sentencing con ditions of the sort at issue here.
1. As petitioner points out (Pet. 6-7), the courts of appeals disagree about whether a federal district court has the authority to direct that a sentence be served consecutively to a yet-to-be-imposed state sentence. In the government's view, contrary to the current position of the court below, Section 3584(a) does not confer that authority. Nevertheless, further review is not warrant ed.
The first sentence of Section 3584(a) identifies two situations in which a district court may take into account other sentences: when "multiple terms of imprisonment are imposed on a defendant at the same time," and when "a term of imprisonment is imposed on a defendant who is already subject to an undischarged term of imprison ment." The second and third sentences establish the default presumptions that correspond to each of those two situations when the district court's order is silent on whether the sentences are to be consecutive or concur rent. A federal defendant who has not yet received, but may one day receive, a sentence in a separate state- court proceeding does not fall within either of the two situations specified in the first sentence of Section 3584(a). For that reason, in the government's view, the presumptions set out in the remainder of that subsection have no application to such a defendant.
The Second, Sixth, and Ninth Circuits have taken that view. United States v. Donoso, 521 F.3d 144, 146-149 (2d Cir. 2008) (per curiam); United States v. Quintero, 157 F.3d 1038, 1039-1041 (6th Cir. 1998); Uni ted States v. Clayton, 927 F.2d 491, 492-493 (9th Cir. 1991); see also United States v. Smith, 472 F.3d 222, 225-227 (4th Cir. 2006) (holding that a federal district court lacks authority to impose a federal sentence con secutive to an as-yet-unimposed federal sentence). The Seventh Circuit has also held, for distinct reasons, that federal district courts lack authority to impose a sen tence that runs consecutively to a future sentence. See Romandine v. United States, 206 F.3d 731, 737-738 (2000).
a. The principal reason why the question does not require resolution by this Court is that under current law, the second court to sentence a defendant will often make its own decision concerning how long the defen dant will spend in prison, irrespective of whether the first sentencing court specified a concurrent or consecu tive sentence. For example, if a defendant is sentenced in state court after being sentenced in federal court, the state court can adjust the length of the state sentence (or suspend a portion of the sentence) to take into ac count the time the defendant has served or will serve in federal custody. See, e.g., Romandine, 206 F.3d at 738 (explaining that the correct "answer" to the circuit con flict "does not matter, and the conflict is illusory").
Even when a defendant faces both federal and state sentences, the terms often do not overlap, simply be cause the sovereign with primary jurisdiction over the defendant is not required to yield custody to the other sovereign; it may keep control over the defendant until the sentence expires. See generally Ponzi v. Fessenden, 258 U.S. 254, 261 (1922) (explaining primary jurisdiction over defendants prosecuted by separate sovereigns). Even if, as here, the sovereign with primary jurisdiction permits the other sovereign to try and convict the defen dant during that time, the other sovereign is not entitled to execute its sentence by immediately taking the defen dant into custody.
Of the four courts of appeals that permit federal courts to impose a sentence consecutively to a not-yet- imposed state sentence, two (including the court below) have mitigated the effect of that holding by suggesting that a federal judgment containing such a directive does not bar the state court from taking steps in the future to permit a concurrent sentence. See United States v. Quintana-Gomez, 521 F.3d 495, 497 (5th Cir. 2008); United States v. Andrews, 330 F.3d 1305, 1307 n.1 (11th Cir.) (per curiam), cert. denied, 540 U.S. 1003 (2003); see also United States v. Douglas, 569 F.3d 523, 527 n.2 (5th Cir. 2009) (defendant withdrew his challenge "because the state proceedings concluded and the state court has chosen to run his state sentence concurrently with the time he is serving in federal custody"). The other two circuits have not clearly spoken to the question whether a state court is so bound. The Tenth Circuit has said that a state court cannot override a federal court's de termination, but on the facts of that case, the State ef fectively did so by releasing the defendant to federal custody with the statement that he had satisfied his state sentence. Williams, 46 F.3d at 58. The Eighth Circuit has said that "the federal sentence controls" in the event of a conflict, Mayotte, 249 F.3d at 799, but did not address the practical implementation of that state ment, and in any event may be reconsidering its view of Section 3584(a) altogether, as discussed below. See pp. 12-13, infra; see also United States v. Hayes, 535 F.3d 907, 910 (8th Cir. 2008) (district court recognized that any direction it might give would have no effect if "the state court decides to run its sentence concurrently, which they are free to do"), cert. denied, 129 S. Ct. 1983 (2009). Thus, even in the circuits that read Section 3584(a) to authorize a sentence consecutive to a future sentence, any practical impact of that interpretation on subsequent sentencing courts is speculative at best.
b. Petitioner contends that the correct interpreta tion of Section 3584(a) has an impact on his ability to ask the BOP to run his federal sentence concurrently with his state sentences now that they have been imposed. That contention is not sufficient to justify plenary re view.
As petitioner states, "[o]ccasionally" a federal defen dant who is also serving a state sentence will request that his federal sentence be deemed to have commenced at the same time as his state sentence and to run concur rently with it. Federal Bureau of Prisons, U.S. Dep't of Justice, Program Statement No. 5160.05, Designation of State Institution for Service of Federal Sentence § 9(b)(4), at 5 (2003) (Designation Program Statement). The BOP has detailed protocols governing when to per mit an inmate subject to a federal sentence to serve it in state custody. In making those decisions, the BOP gives considerable (though not dispositive) weight to the fed eral sentencing court's intent. See id. § 9(b), at 4-7; see also 18 U.S.C. 3621(b) (listing pertinent factors). Even if the sentencing court's intent is not embodied in the judgment, the BOP consults directly with the sentencing court by letter to ascertain its views on whether the sen tences should be allowed to run concurrently. See Des ignation Program Statement § 9(b)(4)(c), at 6.
Petitioner notes (Pet. 8-10), however, that if the sen tencing court does embody in the judgment its intent that the defendant serve a consecutive sentence, the BOP will comply with that order. Designation Program Statement § 9(b)(4)(f), at 6-7. Petitioner contends that, as a result, the interpretation of Section 3584(a) has a concrete result on a federal prisoner whose sentencing judge wishes him to serve a consecutive sentence but whom the BOP would nonetheless permit to serve a con current sentence based on the other relevant factors.
That category is unlikely to include many inmates, and there is no indication that petitioner would fit into it. Even if petitioner made a request for designation to BOP and the consecutive-sentencing order did not exist, there is no indication that any of the other factors in 18 U.S.C. 3621(b) would warrant relief. To the contrary: one of the relevant factors is "any pertinent policy state ment issued by the Sentencing Commission." 18 U.S.C. 3621(b)(5). Far from contradicting the sentencing court's view as expressed in its judgment, in this case the Sentencing Commission's guidance confirms it as to petitioner's state sentence for criminal mischief. Peti tioner committed the offense of conviction while on pro bation for the criminal-mischief offense. PSR ¶¶ 37, 40, 77. His probation was subsequently revoked. See p. 3, supra. When, as here, "the defendant was on * * * state probation * * * at the time of the instant offense and has had such probation * * * revoked," the Sen tencing Commission "recommends that the sentence for the instant offense be imposed consecutively to the sentence imposed for the revocation." Sentencing Guidelines § 5G1.3, comment. (n.3(C)). Nor can peti tioner claim that his other state conviction warrants a concurrent sentence by virtue of being related to the instant offense; the aggravated-assault conviction was not related. PSR ¶¶ 44, 78; see Sentencing Guidelines § 5G1.3(b). As for the other factors, two of them encom pass petitioner's criminal history and offense conduct, which led the district court to impose a sentence at the top of the advisory Guidelines range. See 18 U.S.C. 3621(b)(2) and (3). And the remaining factor-"the re sources of the facility contemplated," 18 U.S.C. 3621(b)(1)-is unlikely to favor petitioner.
In short, even if the consecutive-sentencing order of which petitioner complains were stricken from his judg ment of conviction, he would have only the most remote chance of persuading the BOP to permit him to begin serving his federal sentence before completing his state sentences. The same is true in the run of cases. Indeed, petitioner points to none where a similarly situated in mate was successful. That confirms why this issue lacks the sort of practical significance that would warrant this Court's intervention to resolve the circuit conflict.
3. In the government's view, the conflict over the interpretation of Section 3584(a) is best suited to resolu tion in the lower courts. Indeed, the courts of appeals that disagree with the government's interpretation (and petitioner's), including the court below, have begun to reconsider that stance. The government has taken ac tive steps both to encourage that re-examination in the courts of appeals and to oppose consecutive-sentencing orders in the district courts. See pp. 12-17, infra. Ac cordingly, even if the question had some substantive im pact that gave it continuing significance, review by this Court would be premature at this time.
The Fifth Circuit, too, has signaled some willingness to re-examine the issue. That development is particu larly significant, because in recent years the vast major ity of cases presenting this issue have arisen in the Fifth Circuit.6 Some months ago, the Fifth Circuit ordered briefing on the question whether its precedent on the issue "should be overruled or modified." United States v. Garcia-Espinoza, No. 08-10775 (Dec. 18, 2008). The government filed a brief agreeing that the court should overrule that precedent in an appropriate case, but not ing that Garcia-Espinoza's case was a poor vehicle be cause his state sentence had already expired. The court of appeals accordingly denied a hearing en banc in that case, see Pet. App. 7a-8a, but it may identify another suitable case in which to reconsider the issue. Two of the three judges in Garcia-Espinoza advocated that the court do just that. United States v. Garcia-Espinoza, No. 08-10775, 2009 WL 1362199, at *1 (5th Cir. May 15, 2009) (Owen, J., joined by Dennis, J., concurring) ("writ[ing] separately to recommend that the court re-examine en banc how we have previously construed 18 U.S.C. § 3584").
Despite that development, petitioner contends (Pet. 11-13) that there is in fact no realistic prospect that the Fifth Circuit will change its stance on this issue. Peti tioner notes that the court of appeals denied a hearing en banc in Garcia-Espinoza, but that outcome is ex plained by the vehicle problem identified by the govern ment. Likely for that reason, neither Judge Owen nor Judge Dennis called for an en banc ballot in Garcia- Espinoza itself, see Pet. App. 7a, even though both of them subsequently made clear their view that the Fifth Circuit should reconsider its precedent en banc, Gar cia-Espinoza, 2009 WL 1362199, at *1-*2 (Owen, J., joined by Dennis, J., concurring).
Petitioner also notes that, even after raising the pos sibility of en banc consideration, the Fifth Circuit has affirmed sentencing judgments requiring that federal sentences be served consecutively with state sentences that had not yet been imposed. See Pet. 12 (citing United States v. Farris, 312 Fed. Appx. 598 (2009), peti tion for cert. pending, No. 08-10700 (filed May 26, 2009); United States v. Scott, 311 Fed. Appx. 703, cert. denied, 129 S. Ct. 2849 (2009); United States v. Valenciano- Espinoza, 311 Fed. Appx. 696, cert. denied, 129 S. Ct. 2849 (2009); United States v. Maden, 311 Fed. Appx. 695, cert. denied, 129 S. Ct. 2848 (2009); United States v. Garcia, 310 Fed. Appx. 707 (2009), petition for cert. pending, No. 08-10721 (filed May 19, 2009); United States v. Jochum, 310 Fed. Appx. 679, cert. denied, 129 S. Ct. 2782 (2009).
In each of the cases petitioner cites, however, the defendant affirmatively represented to the court of ap peals that the issue was foreclosed by circuit precedent, and did not ask the court of appeals to reconsider that precedent by petitioning for either initial hearing or rehearing en banc. Indeed, in many of those cases- including this case-the defendant affirmatively asked the court of appeals to affirm summarily. See Pet. C.A. Mot. for Summ. Disposition. Petitioner identifies no case since Garcia-Espinoza-and we are aware of none-in which the Fifth Circuit has denied a petition for rehearing en banc on this issue.
Moreover, petitioner is altogether incorrect in his suggestion (Pet. 13) that "the Government does not be lieve that an appropriate vehicle" for the Fifth Circuit to "resolv[e] the issue can ever exist." The government opposed rehearing en banc in Garcia-Espinoza because the issue had become moot: Garcia-Espinoza was effec tively sentenced in the state case to time already served, and he was transferred shortly thereafter to federal custody to begin his federal sentence. We have ex plained that the correct interpretation of Section 3584(a) has little or no practical effect and therefore does not warrant plenary review by this Court; in Garcia-Espin oza, it no longer had legal effect, and the issue no longer presented any court with a live controversy.
The United States has already recommended to the Fifth Circuit that, when presented with an "appropriate case," the court should "overrule or modify [Brown] and hold that [Section] 3584(a) does not authorize a district court to order that the federal term of imprisonment be served consecutively to a yet-to-be-imposed state sen tence." Gov't Br. at 7, Garcia-Espinoza, supra (No. 08- 10775); see also pp. 12-13 & note 5, supra (noting the government's similar argument to the Eighth Circuit). Petitioner's suggestion (at 13) that the United States has failed to do so is inaccurate.
b. The government has also taken steps to ensure that federal prosecutors act consistently with the inter pretation of Section 3584(a) discussed above. On Janu ary 8, 2009, the Executive Office for United States At torneys informed all United States Attorneys' Offices that the Solicitor General, on behalf of the Department of Justice, had adopted that interpretation. In accompa nying guidance, all federal prosecutors were directed to urge sentencing courts not to order that a sentence run consecutively to (or concurrently with) a yet-to-be-im posed sentence. In addition, except where circuit prece dent (or the plain-error standard of review) dictates oth erwise, the government will not defend an order that runs the federal sentence consecutively to a yet-to-be- imposed sentence.
As petitioner notes, the court below has continued to affirm sentences containing a consecutive-sentencing condition; all of those cases, however, involved sentences imposed before the Department of Justice distributed its guidance to federal prosecutors. Since that time, we understand that practice in the district courts has gen erally changed. As one example, the same district judge who imposed the allegedly erroneous sentencing condi tion in this case was also the sentencing judge in at least eight of the other cases that have reached this Court presenting the same issue-far more than any other individual judge. See also, e.g., United States v. Clinton, No. 08-11007, 2009 WL 2512834 (5th Cir. Aug. 18, 2009) (same judge); United States v. Collier, No. 08-11071, 2009 WL 2513465 (5th Cir. Aug. 18, 2009) (same judge); United States v. Diaz, No. 08-10877, 2009 WL 1687805 (5th Cir. June 16, 2009) (same judge). We are informed by the supervisory Assistant United States Attorney for the relevant divisions of the Northern District of Texas that the district judge has now abandoned his prior practice of imposing consecutive-sentencing conditions. Although we are informed that some district judges may continue to impose similar consecutive sentences, the practice appears to have substantially abated.
Accordingly, even if the courts of appeals were as intractably divided on the question presented as peti tioner suggests, any significance that the issue may have had is diminishing. For that reason as well, further re view is not warranted.
1 Under Texas law, sentences are to run concurrently unless they are "cumulated in the proper manner." Pet. 4-5 & n.1 (citation omitted).
2 Petitioner received credit for time spent in jail while the state charges against him were pending, which reduced his sentence on the aggravated-assault conviction by 279 days. See Judgment of Conviction at 1, State v. Brockman, No. 8823D (Tex. 350th Dist. Ct. Taylor County Nov. 6, 2008).
3 That reading is confirmed by 18 U.S.C. 3584(b), which directs fed eral courts to consider the sentencing factors set out in 18 U.S.C. 3553(a) in deciding whether to impose concurrent or consecutive terms of imprisonment. Several of those factors involve consideration of the total length of incarceration, see, e.g., 18 U.S.C. 3553(a)(2)(B), (2)(C) and (6), and that analysis cannot logically take place when one of the de fendant's sentences has not yet been determined, and indeed may never be imposed.
4 The same question is also asserted by the pending petitions for writs of certiorari in Farris v. United States, No. 08-10700 (filed May 26, 2009); Rollins v. United States, No. 08-1453 (filed May 21, 2009); Garcia v. United States, No. 08-10721 (filed May 19, 2009); and Brent v. United States, No. 08-9319 (filed Mar. 16, 2009).
5 Petitioner misstates the basis on which the government opposed rehearing en banc in Lowe. See Pet. 13. The government "agree[d] with Lowe that [the Eighth Circuit's precedent] should be overruled in an appropriate case," but explained that Lowe's was not a suitable ve hicle because Lowe had not preserved an objection and could not pre vail on plain-error review. Gov't Resp. to Pet. for Reh'g En Banc at 6, Lowe, supra (No. 08-2304).


text:
Geoffrey M. Trachtenberg is a partner at the firm who focuses on personal injury, litigation and appeals, particularly related to motorcycle injury and wrongful death cases. He is Board-Certified in Personal Injury and Wrongful Death litigation, a distinction requiring a significant amount of trial experience that is given to less than 1% of attorneys.
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Geoff graduated from Boalt Hall School of Law at the University of California, Berkeley. Upon graduation, he served as a law clerk to the Honorable Gary L. Taylor, U.S. District Court for the Central District of California, and then practiced with the law firm of Irell & Manella, LLP in Newport Beach, California.
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Geoff is the past-President of the State Bar of Arizona (2015-2016). The SBA President leads the Board of Governors, which itself oversees the Bar’s $15 million annual budget and licenses approximately 18,000 attorneys throughout the state. During his term, Geoff’s focus was “access to justice.” To further this goal he developed the SBA’s Public Service Center, which connects pro bono and modest means clients with attorneys willing to assist them for little or no cost.
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Ansley v. Banner Health Network, 244 Ariz. 389, 419 P.3d 552 (App. 2018).
aff’d by 680 Fed.Appx. 615 (9th Cir. 2017).
Shirar v. Guerrero, 673 Fed.Appx. 673 (9th Cir. 2016).
GoDaddy.com LLC v. Monson, 209 F.Supp.3d 1139 (D. Ariz. 2016).
United Behavioral Health v. Maricopa Integrated Health Sys., 240 Ariz. 118, 377 P.3d 315 (2016).
Premier Physicians Group, PLLC v. Navarro, 240 Ariz. 193, 377 P.3d 988 (2016).
Cramer v. Starr, 240 Ariz. 4, 375 P.3d 69 (2016).
Abbott v. Banner Health Network, 236 Ariz. 436, 341 P.3d 478 (2016).
Apollo Educ. Grp. Inc. v. Henry, 150 F.Supp.3d 1078 (D. Ariz. 2015).
Abbott v. Banner Health Network, 236 Ariz. 436, 341 P.3d 478 (App. 2014).
Southwest Fiduciary, Inc. v. AHCCCS, 226 Ariz. 404, 249 P.3d 1104 (App. 2011).
Progressive v. Blaud, 212 Ariz. 359, 132 P.3d 298 (App. 2006).
Jeter v. Mayo Clinic, 211 Ariz. 386, 121 P.3d 1256 (App. 2005).
Castiglione v. U.S. Life Ins. Co. in City of N.Y., 262 F.Supp.2d 1025 (D. Ariz. 2003).
Manzutto v. ISEC, Inc., 2018 WL 3731006 (Memorandum Decision) (Jul. 31, 2018).
Petrovich v. Branciforte, 2017 WL 117108 (Ariz. App) (Memorandum Decision) (Jan. 12, 2017).
Puch v. Key Health Med. Solutions, 2013 WL 5887624 (Memorandum Decision) (Oct. 31, 2013).
Skoglund v. Neste Dev. Nevada, LLC, 2013 WL 1906233 (Memorandum Decision) (May 7, 2013).

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An alleged conspiracy among foreign producers of potash — a naturally occurring mineral used in agricultural fertilizers and other products — to fix prices charged to U.S. purchasers was not outside the scope of the Sherman Act, the U.S. Court of Appeals in Chicago, sitting en banc, ruled earlier this week.
The purchasers satisfied the requirements of the Foreign Trade Antitrust Improvements Act 1982 (FTAIA) with respect to challenged transactions that were not straightforward import transactions subject to the more general antitrust rules for effects on commerce.
The FTAIA makes clear that “the Sherman Act does not apply to every arrangement that literally can be said to involve trade or commerce with foreign nations.” The FTAIA excludes foreign activities, other than import trade or commerce, from the scope of the Sherman Act, unless the conduct has a “direct, substantial, and reasonably foreseeable effect” on domestic or import commerce.
The complaint alleged an international cartel in a commodity, and it asserted that the cartel succeeded in raising prices for direct U.S. purchasers of potash. The FTAIA’s requirements of substantiality and foreseeability were easily met. The complaint alleged that 5.3 million tons of potash were imported into the United States in one year alone and the vast majority of these imports came from the defendants. Over a five-year period, the price of potash allegedly increased by over 600 percent. Moreover, the effects alleged were a rationally expected outcome of the challenged conduct. It was objectively foreseeable that an international cartel with a grip on 71 percent of the world’s supply of a homogeneous commodity would charge supracompetitive prices, and in the absence of any evidence showing that arbitrage was impossible, those prices (net of shipping costs) would be uniform throughout the world.
Further, the effects were “direct” and not too remote, the court ruled. This was not a case where an action was undertaken in a foreign country and filtered through many layers, finally causing a few ripples in the United States. The court followed the Department of Justice approach with respect to the meaning of "direct" in the statute.
The Justice Department had suggested in a friend-of-the-court brief that the direct effects exception should not be limited to effects that follow as an immediate consequence of the challenged conduct. "Direct" is best defined as "reasonably proximate," according to the government brief.
Thus, the allegations stated a claim, as required by Federal Rule of Civil Procedure 8, and were enough to withstand a motion to dismiss under Rule 12(b)(6).
The case was before the appellate court because a district court decision (2010-2 Trade Cases ¶77,112), denying the defendants’ motion to dismiss, was certified for interlocutory appeal. An earlier decision of a three-judge panel, which reversed the lower court’s ruling after concluding that the complaint failed to meet the requirements of the FTAIA (2011-2 Trade Cases ¶77,611), was vacated in December 2011. The panel had suggested that the issue of whether the FTAIA was an element of a Sherman Act claim or jurisdictional in nature was ripe for reconsideration.
Before taking on the particular issues in this case, the full appellate court considered whether the FTAIA was an element of a Sherman Act claim or was jurisdictional in nature. The court overruled a 2003 en banc decision of the Seventh Circuit, (United Phosphorus, Ltd. v. Angus Chem. Co., 322 F.3d 942, 2003-1 Trade Cases ¶73,971) and held that the FTAIA was an element of the Sherman Act. The FTAIA did not use the word “jurisdiction” or any commonly accepted synonym, it was noted. Instead, it spoke of the “conduct” to which the Sherman Act (or the Federal Trade Commission Act) applied.
Thus, a party contesting the propriety of an antitrust claim implicating foreign activities was required, at the outset, to use Federal Rule of Civil Procedure 12(b)(6), not Rule 12(b)(1). Because foreign connections were unlikely to be difficult to detect, parties who wanted to argue that a particular claim failed the requirements of the FTAIA would be able to do so within these generous time limits, the court reasoned.
The June 27, 2012, decision in Minn-Chem, Inc. v. Agrium Inc., No. 10-1712, will appear at 2012-1 Trade Cases ¶77,943.
For the second consecutive year, New York City-based Cleary Gottlieb Steen & Hamilton has been ranked as having the best antitrust practice by Vault.com, a source of ratings, rankings, and insight for law students and lawyers.
The rankings were based on a poll of 17,000 associates, who were asked to vote for up to three firms they consider strongest in their own practice area. Associates were not permitted to vote for their own firms.
Cleary Gottlieb was mentioned by nearly 46% of the respondents. The firm was described as “international,” “diverse,” “quirky,” and “bookish.” A firm-wide commitment to international legal work was noted.
Arnold & Porter, which was tied with Cleary Gottlieb at the top in last year’s list, dropped to number two. The firm was mentioned by 40% of the respondents.
Further details regarding the antitrust rankings are available here.
An individual and three Ohio businesses could proceed with federal RICO and Ohio Corrupt Practices Act claims against an electric utility and its subsidiary (Duke Energy Corp. and Duke Energy International, Inc.), the U.S. Court of Appeals in Cincinnati has ruled.
The utilities allegedly made “side agreements” to pay substantial and unlawful rebates to large customers, including General Motors, in exchange for withdrawing their objections to a rate-stabilization plan that the utilities had proposed as part of a move to market-based rates. The plaintiffs sufficiently alleged: (1) money laundering and mail fraud; (2) proximate cause; and (3) obstruction of justice.
According to the court, the alleged transfer of money—from large customers to the utility, from the utility to one of its affiliates, and from the affiliate back to the large customers—tainted the money, which became the proceeds of mail fraud. The plaintiffs thus alleged a cognizable claim of money laundering based on mail fraud.
The defendants argued that they were not required to disclose any rebates because differential pricing was not, by itself, a fraudulent practice. The plaintiffs, however, alleged that the utilities had engaged in mail fraud by using the mails to inform their customers that everyone had to pay “mandatory and unavoidable” electricity charges.
Because these mailings implied that all customers paid the same rate, the plaintiffs adequately alleged that the utilities had engaged fraud by failing to disclose their side agreement with large customers.
The utilities argued that: (1) the plaintiffs’ theory of liability rested on the independent actions of the Public Utilities Commission of Ohio (PUCO) and (2) the remedy sought by the plaintiffs would require the PUCO to enforce the law. The argument was flawed because the utilities confused the relationship between an allegedly wrongful act and a proximately caused injury with the relationship between an allegedly wrongful act and a remedy for a proximately-caused injury.
The PUCO did not the cause the plaintiffs’ alleged injury; the defendants did, through an allegedly fraudulent scheme. The fact that the plaintiffs had to bring their case before the PUCO or the court did not mean that a third party had disrupted the chain of causation. The defendants’ argument that a finding of proximate cause would be speculative—because the PUCO might not have found the rebates to be unlawful—was also unavailing.
The plaintiffs sufficiently alleged obstruction of justice as a predicate act for their Ohio Corrupt Practices Act claim against the utilities. The plaintiffs alleged that the utilities’ legal counsel “consciously and deceptively denied,” in on-the-record proceedings before the Ohio Supreme Court, the existence of side agreements between the utilities and some of their customers.
Obstruction of justice under Ohio law involved the communication of false information to any person for the purpose of hindering the discovery of a crime. The selective payment of rebates, the court noted, was a felony in Ohio. Therefore, the communication of false information to any person—for the purpose of hindering the discovery of the selective payment of rebates—constituted obstruction of justice.
The defendants argued that the alleged communication of false information had occurred in civil proceedings, but that fact was irrelevant. Ohio’s obstruction of justice law contained no requirement that a false statement had to be made in a criminal proceeding. The defendants’ contention that the alleged obstruction was made in defense of the corporation did not shield the defendants’ counsel from liability.
Even if corporations were not considered “persons,” corporate counsel was not permitted to freely make false statements before a court and evade liability for obstruction of justice.
The decision is Williams v. Duke Energy International, Inc., CCH RICO Business Disputes Guide ¶12,222.
Labels: Civil RICO, mail farud, money laundering, obstruction of justice, Ohio Corrupt Practices Act, Williams v. Duke Energy International Inc.
Claims by former recipients of collegiate football scholarships that the National Collegiate Athletic Association (NCAA) violated federal antitrust law by entering into an agreement with member schools to restrict the number of football scholarships awarded by each school to a prescribed number and by prohibiting multi-year scholarships did not sufficiently plead a valid relevant market, the U.S. Court of Appeals in Chicago has ruled. Dismissal of the suit was therefore affirmed.
The complaining student-athletes, alleging that the bylaws prevented them from obtaining scholarships that covered the entire cost of their college educations, failed to allege that the NCAA’s actions had an anticompetitive effect in a relevant commercial market, the court stated.
The transactions that NCAA member schools made with premier athletes—full scholarships in exchange for athletic services—were not noncommercial, since schools could make millions of dollars as a result of those transactions. Thus, they were, to some degree, commercial in nature, and therefore took place in a relevant market with respect to the Sherman Act, the court remarked. Moreover, because the bylaws were not inherently or obviously necessary for the preservation of amateurism, the student-athlete, or the general product of college football, they could not be presumptively procompetitive.
However, the plaintiffs’ complaint did not adequately identify either of the markets upon which they claimed the bylaws had an anticompetitive effect—the market for bachelor’s degrees and the market for student-athlete labor.
It was not apparent whether the plaintiffs believed that the bylaws affected an overall market for bachelor’s degrees, which would impact scholarship athletes and non-athletes alike, or some subsidiary market that only concerned athletes attempting to obtain educational degrees in exchange for athletic services.
Even if adequately alleged, such a relevant market would have been problematic in that (1) given the small proportion of bachelor’s degree candidates who were scholarship athletes who scholarships had not been renewed, the anticompetitive impact would have been very minimal; and (2) bachelor’s degrees were not automatically received or guaranteed upon payment of tuition. The difference between a market for educational services and a market for bachelor’s degrees was "of vital importance," the appellate court noted.
While a labor market for student-athletes would have described a cognizable market under the Sherman Act, nothing resembling a discussion of a relevant market for student-athlete labor could be found in the plaintiffs’ amended complaint, the court observed.
The June 18 decision is Agnew v. National Collegiate Athletic Association, 2012-1 Trade Cases ¶77,939.
On the last day of the October 2011 term, the U.S. Supreme Court granted petitions for certiorari in two closely-watched antitrust cases: (1) a Federal Trade Commission (FTC) action challenging a Georgia hospital combination, and (2) a consumer class action against cable provider Comcast Corporation.
In the FTC action, the Court will consider the scope of the state action doctrine. At the request of the FTC, the U.S. Solicitor General in March petitioned the Court to review a decision of the U.S. Court of Appeals in Atlanta (2011-2 Trade Cases ¶77,722, 663 F.3d 1369), holding that the proposed combination of the only two hospitals in Albany, Georgia, was immune from antitrust attack under doctrine. The appellate court had upheld dismissal (2011-1 Trade Cases ¶77,508, 793 F. Supp. 2d 1356) of the Commission’s complaint for injunctive relief pending the completion of an administrative proceeding.
In April 2011, the FTC issued an administrative complaint challenging the transaction (CCH Trade Regulation Reporter ¶16,588). The FTC alleged that a local hospital authority’s purchase of Palmyra Park Hospital’s assets from HCA, Inc. and subsequent lease to Phoebe Putney Health System, Inc. (PPHS)—the operator of Phoebe Putney Memorial Hospital—would substantially lessen competition or tend to create a monopoly in the inpatient general acute-care hospital services market in Georgia’s Dougherty County and surrounding areas. The agency also sought injunctive relief to prevent the consummation of the plan prior to the completion of the administrative proceeding. Pending conclusion of the court action, the FTC stayed its administrative proceedings (CCH Trade Regulation Reporter ¶16,620).
(2) whether such a state policy, even if clearly articulated, would be sufficient to validate the alleged anticompetitive conduct, given that the local government entity neither actively participated in negotiating the terms of the hospital sale nor had any practical means of overseeing the hospital’s operation.
According to the petition, the case presents the question of whether a hospital’s acquisition of its only rival, effectuated by using a substate governmental entity’s general corporate powers, is exempt from antitrust scrutiny under the “state action doctrine.” The appellate court decision conflicts with decisions of the Fifth, Sixth, Ninth, and Tenth Circuits, the agency contends.
The petition for review, FTC v. Phoebe Putney Health System, Inc., Dkt. 11-1160, was granted on June 25, 2012.
The Court has also decided to consider a decision of the U.S. Court of Appeals in Philadelphia (2011-2 Trade Cases ¶77,575, 655 F.3d 182), upholding the certification of a class of approximately two million cable television customers in the Philadelphia area. The customers allege that Comcast engaged in monopolization, attempted monopolization, and market or customer allocation through a series of acquisitions and cable system swap arrangements.
The appellate court ruled that the lower court satisfied the “rigorous analysis” standard established in In re Hydrogen Peroxide Antitrust Litigation (2008-2 Trade Cases ¶76,453, 552 F.3d 305) in determining that questions of fact or law common to class members predominated over individual issues, for purposes of meeting the certification requirements of Federal Rule of Civil Procedure 23(b)(3).
The High Court may see things differently.
In its petition, Comcast asked: whether a district court may certify a class action without resolving “merits arguments” that bear on prerequisites for certification under Federal Rule of Civil Procedure 23, including whether purportedly common issues predominate over individual ones under Rule 23(b)(3).
The petition for review, Comcast Corp. v. Behrend, Dkt. 11-864, was granted on June 25, 2012.
The Michigan Farm and Utility Equipment Act did not require two dealers to make an election of remedies between their breach of contract and dealer law claims against equipment manufacturer Deere & Company, the U.S. Court of Appeals in Cincinnati has ruled.
The district court did not err in refusing to reduce a jury’s award of more than $5.4 million in damages against Deere in a lawsuit brought by the two dealers against Deere for termination of their dealership agreements in violation of the Michigan statute, among other claims.
Deere argued that the clear and unambiguous language of the dealer law required the dealerships to elect to recover either on their breach of contract claim or their statutory claim, but not both. No case has analyzed this provision, and Deere does not explain which words in this provision create the obligation it asserts, the court noted.
Subsection 1 of Section 5 of the Act provided that the dealer may elect to pursue either a contract remedy or the remedy provided in the Act, the court observed. Subsection 2 did not generally require a dealer to choose between its statutory claim and its breach of contract claim. Rather, it provided that a dealer’s pursuit of a contract remedy did not bar its right to pursue a statutory remedy as to inventory not affected by the contract remedy.
To the extent Section 5 required an election of remedies, its purpose was to protect against double recovery. Once the dealers opted not to seek the remedy of inventory buy-back under the statute, and instead sought the statutory remedy of recovery of the loss of asset value, no further election was required, the court determined.
Michigan’s comparative-fault scheme did not require a reduction in the jury’s award of damages, based on the jury’s finding of 65% of the fault allocated to Deere and 35% of the fault allocated to a dealer.
The jury found Deere liable to the dealers on three separate grounds. The district court had instructed the jury that, in the event it found Deere liable on any of those grounds, the damages should amount to the loss of net asset value for the dealerships.
One of the theories of liability was subject to Michigan’s comparative fault statute. If Deere had been found liable only on that claim, the damages would have been reduced in proportion to the jury’s fault allocation, according to the court. But the award of damages for loss of net asset value was also supported by two additional theories of liability—a breach of contract claim and the violation of the Farm and Utility Equipment Act—either of which was adequate grounds to support the plaintiffs’ recovery of the full amount of damages assessed without any reduction of fault to one of the dealers, the court decided.
The June 13, 2012 decision is Laethem Equipment Co. v. Deere & Co., CCH Business Franchise Guide ¶14,846.
Former professional football players failed to plausibly allege that the National Football League (NFL) and its member teams restrained trade in the market for the players’ images and likenesses by not allowing them the rights to films and images from the games in which they played, the federal district court in St. Paul, Minnesota, has ruled. The players failed to establish any concerted action that was illegal under the Sherman Act.
The players relied “heavily, almost exclusively,” on the Supreme Court's 2010 decision in American Needle, Inc. v. NFL, 2010-1 Trade Cases ¶77,019, 130 S. Ct. 2201, the court explained. However, the decision did not support their claims. In American Needle, the Supreme Court held that the NFL and its member teams were capable of conspiring to restrain trade for NFL-related merchandise that each team owned separately from the NFL.
The historical game footage at issue in the current matter was owned by the NFL either alone or in conjunction with the teams involved in the game being filmed. These entities had to cooperate to produce and sell these images; no one entity could do it alone, according to the court. The NFL and its teams were capable of conspiring to market each team’s individually-owned property, but not property the teams and the NFL could only collectively own.
Moreover, the former players did not explain what market might exist in game footage that featured only that footage to which any player can claim to be individually entitled—a single player’s image without any NFL logos or marks. Thus, even if there was concerted action to restrain trade in the former players' images, that agreement was "necessary to market the product" and was therefore not illegal.
If the NFL refused to pay the former players for the use of their images in its copyrighted material, then the former players might have a claim for a violation of their right of publicity. However, this was a royalties issue, not an antitrust issue. Therefore, the former players’ complaint was dismissed with prejudice.
The June 13 decision is Washington v. National Football League, 2012-1 Trade Cases ¶77,926.
Although it was very likely that Amazon’s “Conditions of Use and Privacy Notice” disclosed sufficient information to negate computer users’ Washington Consumer Protection Act (CPA) claims, limited discovery would be appropriate on the issue of whether Amazon accessed the users’ computers without authorization, the federal district court in Seattle has ruled. The computer users’ Computer Fraud and Abuse Act (CFAA) claim was dismissed with prejudice.
The users would satisfy the injury element only if they could demonstrate that Amazon accessed their computers or their information without authorization, the court observed. The issue of authorization was “quite complicated.” Amazon’s Conditions of Use and Privacy Notice appeared to notify visitors that it would take the very actions complained of: place browser and Flash cookies on their computers and use those cookies to monitor and collect information about their navigation and shopping habits.
Amazon’s motion to dismiss, to the extent that it relied on exhibits including Amazon’s Conditions of Use and Privacy Notice, was construed as a motion for summary judgment, and the computer users would be provided a reasonable opportunity to present all pertinent material. Limited discovery concerning Amazon’s conditions and notice, their location on the website, and each plaintiff’s use of the site would likely be both beneficial and appropriate, according to the court.
Non-monetary detriments could not constitute loss, contrary to the computer users’ contention, and they alleged nothing from which a calculable loss could be inferred, the court concluded.
The June 1 opinion in Del Vecchio v. Amazon.com, Inc. will be reported at CCH Advertising Law Guide ¶64,728.
The Federal Trade Commission is amending its franchise disclosure rule to raise the monetary thresholds used to determine whether a franchise sale is exempt from the rule, which requires presale disclosure information to prospective franchise purchasers.
The 2007 amendments to the franchise rule provide three exemptions based on a monetary threshold in 16 CFR Part 436 .8 (CCH Business Franchise Guide ¶6018).
(3) Franchise sales to large entities that have been in business for at least five years and have a net worth of at least $5,424,500 (currently $5 million), §436.8(a)(5)(ii).
The franchise rule requires the FTC to adjust the monetary thresholds every four years, based on the Consumer Price Index. The adjustments will take effect on July 1, 2012.
The Commission voted 5-0 to approve the Federal Register Notice on the adjustments. Further information on the franchise rule amendments appear here on the FTC website.
Johnson & Johnson Agrees to Spin Off Bone Fracture System to Complete Takeover of Synthes, Inc.
The FTC will require Johnson & Johnson to sell its system for surgically treating serious wrist fractures, under the terms of a proposed consent order resolving charges that Johnson & Johnson’s proposed $21.3 billion acquisition of Synthes, Inc. would illegally reduce competition for these systems.
Johnson & Johnson has announced its intention to sell the system, along with the rest of its product line for treating traumatic injuries, to Biomet, Inc.
If the deal were allowed to proceed as originally proposed, the Commission stated, Johnson & Johnson and Synthes together would have more than 70 percent of the U.S. market for the wrist fracture treatment systems.
"J&J and Synthes are direct competitors for these important systems used in the surgical treatment of traumatic wrist fractures," said Richard Feinstein, Director of the FTC's Bureau of Competition. "This order will ensure that the hospitals and surgeons that use these systems to care for consumers will not face higher prices or reduced innovation in the future."
According to the FTC's June 11 complaint, Johnson & Johnson’s proposed acquisition of Synthes would harm competition in the U.S. market for volar distal radius plating systems, internal devices that are surgically implanted on the underside of the wrist to achieve proper alignment of the radius bone following a fracture.
Distal radius fractures, in which a portion of the radius closest to the wrist is broken, typically happen when someone braces for a fall, and are among the most common types of fractures. Such fractures most often occur when an older person falls or when people are playing sports. While many people with distal radial fractures can be treated with conventional casts, if the radius bone is displaced, surgery almost always is required. Volar distal radius plating systems are the primary option for surgeons because they are easy to implant, reduce recovery times, and enable patients to move more freely than casts.
The complaint alleges that the U.S. market for volar distal radius plating systems is highly concentrated. Synthes is the leading maker of volar distal radius plating systems in the United States, accounted for 42 percent of all U.S. sales in 2010, and has a strong clinical reputation in the trauma field.
Johnson & Johnson acquired its system—known as DVR—from Hand Innovations in 2006, and it was among the first anatomically contoured volar distal radius plating system. Many surgeons still consider the DVR system to be the best volar distal radius plating system available, and it accounted for 29 percent of all system sales in 2010.
The proposed order settling the FTC's charges preserves competition in the U.S. market for volar distal radius plating systems by requiring Johnson & Johnson to sell its U.S. DVR assets to a qualified buyer within 10 days of when the deal is consummated.
While the Commission's competitive concern with this transaction is limited to volar distal radius plating systems, Johnson & Johnson has opted to sell its entire trauma portfolio, which includes the DVR assets, to Biomet, a successful orthopedics company with a recognized brand name, an extensive nationwide sales force, and existing relationships with surgeons and hospitals.
Biomet's current volar distal radius plating system is not competitively significant, and the FTC believes that Biomet, once it acquires the DVR assets, will be able to replicate the competition in the U.S. market for such systems that existed before Johnson & Johnson's acquisition of Synthes.
The proposed order will allow the FTC to appoint an interim monitor to oversee the sale of the DVR assets to Biomet, and to appoint a trustee to sell the assets if they are not successfully divested by J&J within the time required.
Details of the FTC's complaint and proposed consent order—In the Matter of Johnson & Johnson, FTC Dkt. No. C-4363—appears here on the FTC website.
Labels: acquisitions and mergers, divestitures, In the Matter of Johnson and Johnson, Sythes Inc.
The U.S. Court of Appeals in Cincinnati has ruled that Robinson-Patman Act claims should not have been dismissed against retail electricity service provider Duke Energy Corporation for discriminating in price between different purchasers through Duke subsidiaries and an affiliated company.
Dismissal of the action (2009-1 Trade Cases ¶76,595) brought by individuals and businesses based in Ohio was reversed, and the case was remanded. The antitrust claims were not barred by the filed-rate doctrine and were adequately stated.
The complaining customers adequately alleged injury and competitive disadvantage sufficient to survive a Rule 12(b)(6) motion to dismiss, the court ruled. The complaining customers alleged that they suffered competitive disadvantage compared to certain favored companies as a result of alleged “indirect rebates to General Motors Corporation and other large consumers in exchange for their withdrawal of objections to a rate-stabilization plan under review by the Public Utilities Commission of Ohio (PUCO). The complaining customers would have had to pay substantially more for electricity than their competitors due to the rebates.
The court also rejected Duke’s argument that electricity was not a commodity within the scope of the Robinson-Patman Act. The defendants suggested that electricity was not a commodity because the Act used terms such as “goods, wares, or merchandise to refer to commodities, and these terms were not commonly applied to electricity. Moreover, the complaining customers were not required to purchase for resale in order to pursue a Robinson-Patman Act claim, the court held. The defendants’ contention that the Robinson-Patman Act applied only to the resale of a purchased product was not consistent with case law.
The complaining customers’ federal claims against Duke were not barred by the filed-rate doctrine, the court ruled. The filed-rate doctrine barred challenges to the reasonableness of a filed rate. The complaining customers’ claims did not concern the particular rate set by the PUCO, but rather payments made outside of the rate scheme. The complaining customers argued that the side agreements were not filed with any agency, including the PUCO, and are unlawful. The allegation that certain large consumers, by receiving a rebate, effectively paid a lower rate than the complaining customers did not transform the action into an attack on filed rates.
The June 4 decision is Willams v. Duke Energy International, Inc., 2012-1 Trade Cases ¶77,913.
Labels: Filed-Rate Doctrine, Price Discrimination, Robinson-Patman Act, Williams v. Duke Energy International Inc.
The full U.S. Court of Appeals in New York City will not review a panel’s decision holding that a class action waiver provision contained in commercial contracts between merchants and charge card issuer/servicer American Express Company was unenforceable. A request from American Express for an en banc rehearing of the decision denying enforcement of the class action waiver provision (2011-1 Trade Cases ¶77,366) was denied.
In March 2011, the panel decided that the class action waiver was void because it precluded the complaining merchants from enforcing their statutory rights under the antitrust laws. The record demonstrated that the size of any potential recovery by an individual plaintiff would be too small to justify the expense of bringing an individual action. The court noted that there was no rule that class action waivers in arbitration agreements were per se unenforceable or per se unenforceable in the context of antitrust actions. The enforceability of a class action waiver in an arbitration agreement had to be considered on its own merits, in the court’s view.
It was the second time that the court had considered the issue. An earlier decision (2009-1 Trade Cases ¶76,478), also rejecting the class action waiver provision, was vacated (2010-1 Trade Cases ¶76,994) in light of the U.S. Supreme Court’s 2010 decision in Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 2010-1 Trade Cases ¶76,982. In Stolt-Nielsen, the Supreme Court held that under the Federal Arbitration Act (FAA) the agreement of the parties was the basis for determining whether to subject claims to class arbitration.
Shortly, after the panel’s March 2011 decision was published, the Supreme Court decided AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740. In that decision, the High Court held that state law may not be used to invalidate a class action waiver in an arbitration agreement on the ground that the only economical way to litigate the claim was through a class action.
A strong dissent from the denial of rehearing en banc was written by Chief Judge Dennis Jacobs. The dissent contended that the holding could not be squared with the FAA, employed a dubious ground of distinction to overcome the U.S. Supreme Court’s 2011 holding in Concepcion, and precariously relied on dicta that large “arbitration costs” cannot be allowed to prevent a plaintiff from “effectively vindicating” a statutory right.
The May 29 decision is In re: American Express Merchants’ Litigation, 2012-1 Trade Cases ¶77,910.


text:
Present: KANTROWITZ, BERRY, & DOERFER, JJ.
Parent and Child, Child support. Divorce and Separation, Child support, Modification of judgment.
September 13, 2000, when his support order was temporarily reduced, Croak had received $447,700 in "income and assets" [Note 7] while Bergeron and the children had struggled to meet their living expenses on a tiny fraction of that amount. On these facts, and others (which we shall discuss, infra), the judge concluded that Croak had failed to demonstrate a material change in circumstances and, in fact, had "wrongfully and considerably benefitted from the reduction in his child support during the pendency of this action." By a judgment dated November 19, 2003, the probate judge denied Croak's complaint for modification and ordered him to pay $118,640.76 to Bergeron, said sum representing the child support accrued ($964 per week minus $156.92 per week) during the 147-week period from September 13, 2000, to July 8, 2003 (the date of the Rhode Island support order, which was issued shortly before the hearing on the merits of Croak's complaint). [Note 8] Croak has appealed.
2. Discussion. Croak argues that the judgment must be reversed as the judge grossly overstated for guidelines purposes his (Croak's) income during the three-year period under review. More specifically, he asserts that (1) it was error for the judge to count as income the one-time payments received by him from the settlement and the trust distribution or inheritance, and (2) it was improper "double counting" to treat funds prematurely withdrawn from his IRAs as income for child support purposes as those funds had already been divided as part of the marital estate upon divorce. He requests that the matter be remanded to the Probate and Family Court for a recalculation of child support based on "the correct income figures."
. . ." (emphasis supplied), [Note 11] Child Support Guidelines, preamble; see Crowe v. Fong, 45 Mass. App. Ct. 673 , 677 (1998); Richards v. Mason, 54 Mass. App. Ct. 568 , 575 (2002), we have stated that the "guidelines indicate that a judge is to consider the totality of the parties' circumstances in determining their support obligations." Buckley v. Buckley, 42 Mass. App. Ct. 716 , 723 (1997). See Schuler v. Schuler, 382 Mass. 366 , 373-376 (1981) (a pre-guidelines case); Bassette v. Bartolucci, 38 Mass. App. Ct. 732 , 736-737 (1995); Brooks v. Piela, 61 Mass. App. Ct. 731 , 734-735 (2004). See also Kindregan & Inker, Family Law and Practice � 39.7 (3d ed. 2002).
Guidelines II-H; Flaherty v. Flaherty, 40 Mass. App. Ct. 289 , 291 (1996); Crowe v. Fong, supra at 679-680, the judge's findings, taken together, suggest strongly the view that Croak may have forgone (or manipulated) employment opportunities and that the income reported by him may not reflect the income he was capable of earning.
that occurs when property is awarded to one spouse in an equitable distribution of marital assets and is then also considered as a source of income for purposes of imposing support obligations." Champion v. Champion, 54 Mass. App. Ct. 215 , 219 (2002). Sampson v. Sampson, 62 Mass. App. Ct. 366 , 373- 374 (2004). Adlakha v. Adlakha, 65 Mass. App. Ct. 860 , 865 (2006). See Dalessio v. Dalessio, 409 Mass. 821 , 828 (1991), S.C., 413 Mass. 1007 (1992). Although "[c]ourts and commentators have often disagreed . . . as to what constitutes double-dipping," Sampson v. Sampson, supra at 374, we have stated that there is nothing in the Supreme Judicial Court's Dalessio decision, supra, or in G. L. c. 208, � 34, [Note 18] that prohibits double dipping as matter of law. See Champion v. Champion, supra at 222. Rather, as Croak acknowledges in his brief, the judge must look to the equities of the situation to make her determination. See ibid.
Even were we to assume that the concept of double counting has application in the present case, and were to assume further that the judge engaged in some double counting, we would conclude that, in the circumstances presented here (including, as we have discussed, Croak's use of his IRA funds as a replacement for earnings and for his own support and benefit during his periods of unemployment, and the parties' disparate economic positions), a failure to consider the IRAs would have resulted in an inequity. See ibid.
[Note 1] The child support modification in 1999 was based upon the judge's calculation of Croak's income for the period from September 28, 1998, when he resumed work in the nuclear power industry after a period of unemployment, to July 9, 1999, in the amount of $2,609.49 per week. The amount of support was allocated as $918.54 per week for child support and $51 per week for health insurance costs. The judge found that Croak had been paying substantially less in child support than the amount called for by the guidelines.
[Note 2] The second judge mistakenly stated in her temporary order, and later in her findings and judgment, that the earlier modification judgment called for a combined payment of $964 per week. Neither party makes an issue of the point.
[Note 3] Jurisdictional issues arose in the matter as Bergeron and the children had moved to Rhode Island, but the modification action was ultimately heard in Massachusetts where Croak resided at the time he filed his complaint. Cf. Klingel v. Reill, 446 Mass. 80 , 86-87 (2006). After resolving the present action, the judge determined that "Rhode Island is the appropriate [jurisdiction] to resolve all future child support and custody matters between the parties." Bergeron has been receiving child support pursuant to a Rhode Island court order dated July 8, 2003.
[Note 4] At trial, Croak, through counsel, requested that the judge take an average of the income he had earned during the three years between the issuance of the temporary order and the hearing on the merits and, applying that average amount, as well as the average income received by Bergeron, to the guidelines, conclude that the amount of child support which should have been paid to Bergeron during the period under review was $133 per week.
[Note 5] Croak testified that his mother and father had owned as joint tenants a home in Massachusetts. After his parents' deaths (his mother predeceased his father), Croak learned that he had been "disinherited from the property." Croak brought a claim against the estate and eventually received a settlement from the estate which he characterized at trial as one "for previous improvements to a property where I was situated." Although Croak testified that he actually received about $40,000 from the settlement proceeds, after the payment of attorney's fees, he provided no supporting documentation concerning the amount of attorney's fees he paid and he makes no reference in his brief to the payment of attorney's fees. In all events, the judge's findings reflect that the judge was cognizant of Croak's claim that he had paid $20,000 to his attorneys.
[Note 6] Earlier in her findings the judge stated that Croak's aggregate gross income for 2002 from all sources includable under the guidelines was $103,042. This figure was based, in part, on Croak's 1099 and W-2 forms which showed earned income of $53,042. (Croak failed to produce his prepared, but not filed, 2002 Federal tax return in response to a subpoena served in hand.) The judge later found, however, that Croak represented on his most recent financial statement, dated October 17, 2003, which is not included in the record appendix, that his income in 2002 (apart from his inheritance) was $70,703.
[Note 7] Although Croak does not challenge in his brief the amount found by the judge, it is difficult to discern on the record before us how the judge arrived at the figure. In all events, even if the income and assets amount was somewhat lower, it would not change the result that we reach in this case.
[Note 8] Croak filed a motion for new trial that was denied. He also filed a motion for relief from judgment. Although no action appears formally to have been taken on the motion for relief from judgment, as that motion is identical to the motion for new trial, Croak assumes, as do we, that the judge treated the two motions as a single motion and denied them.
[Note 9] We have noted that there is a slight difference in certain of the standards set forth in � 28 and the guidelines. See Crowe v. Fong, 45 Mass. App. Ct. 673 , 677 & n.3 (1998). Croak does not address those differences on the appeal and does not challenge the judge's citation to � 28 for the proposition that an order for child support may be modified where the judge finds that a material and substantial change in the circumstances of the parties has occurred.
[Note 10] The guidelines provide, in the preamble: "There shall be a presumption that these guidelines apply, absent agreement of the parties, in all cases seeking the establishment or modification of a child support order. A specific, written finding that the guidelines would be unjust or inappropriate and that the best interests of the child have been considered in a particular case shall be sufficient to rebut the presumption in that case." The guidelines further provide that "[a] modification may be allowed upon showing a discrepancy of 20% or more between an established order and a proposed new order calculated under these guidelines. The presumption establishing a proposed new order may be rebutted in cases where the amount of support required under the guidelines is due to the fact that the amount of the current support order resulted from a rebuttal of the guideline amount or by an allowance of an agreement of the parties and there has not been a change in the circumstances which resulted in a rebuttal of the guideline amount." Child Support Guidelines, preamble. The guidelines (effective February 15, 2002) also recite that they are not meant to apply where the combined gross income of the parties exceeds $135,000 or where the gross income of the noncustodial parent exceeds $100,000. Child Support Guidelines II-C. (The guidelines previously set the income limits at the $75,000/$100,000 level.) In cases where the parties' income exceeds these limits, the judge is to consider the award of support at the $100,000/$135,000 level as a minimum presumptive level of support to be awarded. Ibid. Additional amounts of child support may be awarded at the judge's discretion. Ibid.
[Note 11] The guidelines define income as "gross income from whatever source," including, but not limited to, twenty-six named sources of income (e.g., salaries and wages, bonuses, insurance benefits [including those received for disability and personal injury], income from trusts, contractual agreements, capital gains in real and personal property transactions to the extent that they represent a regular source of income, perquisites or in kind compensation to the extent that they represent a regular source of income, income from interest in an estate [direct or through a trust], lottery or gambling winnings received either in a lump sum or in the form of an annuity, and prizes or awards). Child Support Guidelines I-A. See Rosenberg v. Merida, 428 Mass. 182 , 187 (1998) (describing the definition of income contained in the guidelines as "broad").
[Note 12] There is a split among the jurisdictions as to the treatment of inheritances for purposes of the guidelines (which guidelines vary, to some extent, from State to State). "In some jurisdictions, the entire amount of the inheritance is included as gross income for purposes of determining child support. Other states, however, have held that only the interest generated by the inheritance constitutes gross income. A third approach, adopted in New York, is to treat inheritances as a factor in deviating from the basic child support obligation and awarding additional child support [citations omitted]." Cody v. Evans-Cody, 291 A.D.2d 27, 30-31 (N.Y. 2001) (there is statutory authority in New York authorizing a court to allocate a portion of a parent's inheritance to child support). At least one jurisdiction has adopted a hybrid approach, treating only that portion of an inheritance that a parent withdrew and spent as gross income, and the remainder of the inheritance as an interest-generating asset. See In re A.M.D., 78 P.3d 741, 743, 746 (Colo. 2003). See also Morgan, Child Support Guidelines: Interpretation and Application � 2.03 [e]  (2006), and cases cited. Similarly, the courts of other jurisdictions have not always been uniform in their treatment of certain settlement proceeds. See, e.g., id. at � 2.03[e] , and cases cited. In the instant matter, the judge simply cited to the guidelines for the proposition that "income is defined as gross income from whatever source." See note 11, supra.
[Note 13] To the extent a consideration of available resources may involve some deviation from the guidelines, see Cody v. Evans-Cody, 291 A.D.2d at 30-31; Humphreys v. DeRoss, 567 Pa. 614, 624-625 (2002) (although under Pennsylvania's guidelines the corpus of an inheritance is not included in income, the guidelines provide that an asset, such as an inheritance, may be considered in deciding whether to deviate from the presumptive amount of support determined by the guidelines), we think it is implicit in the judge's findings and rationale that she was of the opinion that a substantial reduction in child support (as requested by Croak) based solely on Croak's alleged income would be unjust or inappropriate in the circumstances and not in the best interests of the child. See Buckley v. Buckley, 42 Mass. App. Ct. at 723.
[Note 14] The judge found that Bergeron's total combined earned income, alimony, and unemployment income reported by her on her 2000, 2001, and 2002 tax returns was $64,339. Bergeron testified that since September 13, 2000, she has had difficulty making ends meet and has, on occasion, resorted to going to a "food pantry" to obtain free food. She also testified that she could not pay her health insurance.
[Note 15] The court did not hold in Schuler v. Schuler, supra, that a support provider would have to deplete his total liquid or other assets in an effort to meet his support obligations.
[Note 16] Although the parties' separation agreement and the divorce judgment are not included in the record appendix, neither party appears to dispute that Croak was assigned certain IRAs at the time of the divorce. (Croak testified that while he had $360,000 in "retirement funds" at the time of the divorce, he had spent those funds by the time of the modification trial in October, 2003). It is not clear whether Croak made additional contributions to his IRAs in 1998 or 1999, subsequent to the divorce (contributions which, if made, could not form the basis of a claim of double counting). As we have stated, Croak has not included in the record appendix the financial statement dated October 17, 2003, that he submitted to the court and which was referred to by the judge.
[Note 17] Croak does not argue in any meaningful way that an IRA distribution per se cannot be included as income for purposes of the guidelines.
[Note 18] The present case is an action to modify child support under G. L. c. 208, � 28.
[Note 19] Croak raises no argument in his brief that he does not have the ability to comply with the judge's order for the payment of the accrued child support.

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The American Civil Liberties Union (?ACLU?) is a nationwide, nonprofit, nonpartisan organization with over 500,000 members, dedicated to the principles of liberty and equality embodied in the Constitution and our nation?s civil rights laws. Founded in 1920, the ACLU has vigorously defended civil liberties for over ninety years, working daily in courts, legislatures and communities to defend and preserve the individual rights and liberties that the Constitution and laws of the United States guarantee everyone in this country. The ACLU has appeared before this Court in numerous civil rights cases, both as direct counsel and as amicus curiae.
The NAACP Legal Defense & Educational Fund, Inc. (?LDF?) is a non-profit legal organization established to assist African Americans and other people of color in securing their civil and constitutional rights. For more than six decades, LDF attorneys have represented parties and appeared as amicus curiae in litigation before the Supreme Court and other federal courts on matters of race discrimination, including through the type of direct constitutional enforcement actions at issue in this case. The Mexican American Legal Defense and Education Fund (?MALDEF?) is a national civil rights organization established in 1968. Its principal objective is to promote the civil rights of Latinos living in the United States through litigation, advocacy and education. MALDEF has represented Latino and minority interests in civil rights cases in the federal courts throughout the nation, including the Supreme Court. MALDEF?s mission includes a commitment to protect the rights of immigrant Latinos in the United States, and MALDEF has asserted preemption theories in federal court to further this commitment.
I. Enforcement of the Constitution is not dependent on affirmative action by the political branches of government. Rather, from this Nation?s earliest times to the present, the federal courts have consistently exercised their equitable powers to compel compliance with the Constitution, without suggesting the necessity for a statutory vehicle, such as 42 U.S.C. § 1983, for such authority. Those equitable powers have been, and continue to be, particularly important for minorities, immigrants, low-income individuals, and others whom our majoritarian political processes are often unwilling or unable to protect against constitutional violations. Indeed, direct actions brought to enforce compliance with the Constitution have resulted in many of this Court?s most important civil-rights and civil-liberties decisions, including Bolling v. Sharpe, 347 U.S. 497 (1954), Terry v. Adams, 345 U.S. 461 (1953), Truax v. Raich, 239 U.S. 33 (1915), and Pierce v. Society of Sisters, 268 U.S. 510 (1925); in none of those cases did the Court suggest that it was acting under § 1983 or another statutory vehicle. That history is consistent with the many cases in which this Court enforced other provisions of the Constitution, such as the Contracts Clause and Commerce Clause, as well as structural principles of federalism and separation of powers.
Such direct actions are also available to enforce a claim of preemption under the Supremacy Clause, see U.S. Cert. Amicus Br. 15-18, including where the preemption is based on a statute enacted under Congress?s spending power. This Court has entertained and sustained many preemption claims in that context, recognizing the appropriateness of direct actions to vindicate the supremacy of federal law. Petitioner suggests that such direct actions should not be allowed, or drastically restricted to narrow contexts, but that rule would seriously undermine federal law. In many contexts, a direct action is the only way in which the supremacy of federal law could be established. Requiring litigants asserting a Supremacy Clause claim to wait for a statecourt action would be grossly inefficient and could result in federal law being undermined by invalid state laws.
II. Direct actions remain critical to vindicate the supremacy of federal law. This is especially true for racial minorities, immigrants, and low-income individuals, who in many circumstances have difficulty obtaining access to, or support from, the federal political branches, and who often depend on a judicial remedy to prevent enforcement of state laws that conflict with federal laws. In contexts as diverse as immigration, housing, and public assistance, direct actions remain the only effective avenue to ensure the supremacy of federal law. Eliminating that avenue would seriously undermine federal law, because other avenues of enforcement of federal law?such as termination of federal funding or enforcement actions brought by the United States?are highly impractical and offer little or no hope for successful enforcement on behalf of individuals directly harmed by states? illegal conduct. Absent direct actions brought to establish the supremacy of federal law by those most directly affected by preempted state laws, there could well be no meaningful remedy for state noncompliance with the Constitution?s fundamental safeguards.
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