A Triple Smack Down for Obama in Supreme Court

Yesterday, June 18th, the US Supreme Court announced four opinions, and three that involved the federal government and positions taken by the Obama Administration. The fourth decision was a Confrontation Clause case and DNA testimony involving a state trial in which the federal government was not involved. In the three cases- two involving Indian tribes, but having ramifications beyond Indian affairs- the federal government came out the decided loser. It is also interesting to note that in one case in a 5-4 decision, the traditional ideological split on the Court did not hold and created a strange voting bloc.

The first case was decided 8-1 with Sotomayor being the lone dissenter. In a case involving an Indian tribe whose name is way too long to publish here, we will simply call it the Patchak case. The Court ruled that the federal government essentially waived sovereign immunity to a suit challenging the government’s takeover of land to be held in trust for the tribe. In order to facilitate the construction of a casino in Michigan, the tribe transferred title to the land to the federal government. Mr. Patchak, a neighbor of that land, sued to have have that transfer negated since it did not comply with the 1934 Indian Reorganization Act. Simply, this tribe was not recognized by the government when the law was enacted. Patchak also did not wish to have a casino as a neighbor. Justice Kagan, writing for the majority, stated that the government essentially waived its immunity from suit by virtue of application of the Administrative Procedures Act. Another law- the Quiet Title Act- was also implicated in the decision. Along the way, Kagan summarily brushed away the arguments of the tribe, as well as those of the Obama Interior Department, that the laws in question should be read broadly to involve any suit where the government has title to land. If that were the case, then any transfer of title to land in order to facilitate economic development would essentially block any lawsuit involving the ultimate use of that land. Correctly, Kagan stated that Congress could and maybe should change the law, but since that is not the case, they ruled as they did. Furthermore, the District Court asserted that Patchak did not have standing to sue which the Circuit Court reversed. The Supreme Court affirmed the Circuit Court stating that since the purpose of the government taking the land in trust was economic development, people living near that land, like Patchak, are affected by its use and their interests must be protected. Simply, the government was asserting that (1) they were immune from suit in the first place and even if not (2) Patchak had no standing to sue. They lost, rather loudly, both arguments.

The second case also involved an Indian tribe and is known as Salazar vs. Ramah Navajo Chapter. This case involved a dispute over the government paying the Indian tribe for contracted support services. Under federal law, because of the unique relationship between the federal government and Indian tribes, certain services like police and education must be provided for by the government, but they are also under a mandate to allow the individual Indian tribes to perform these duties and most do. The government then pays them for the services they would normally perform and that is not the issue here. As anyone knows, with any government funds come government strings attached. For example, the tribes must audit the finances to make sure funds are going where intended, and other “overhead” functions. For these, the government contracts with the tribe to perform these administrative functions for which they are compensated. So far, so good. Except Congress, when allowing this contractual relationship stated that the costs were “subject to the availability of appropriations.” In essence, the Court stated, despite that line, that if one end of the contract lives up to its end of the bargain, the other end must live up to its end of the bargain and pay the contracted cost regardless of the “availability of appropriations.” They stated that it was not the fault of the Indian tribes that the Interior Department diverted the money elsewhere, or that Congress failed to appropriate money in the first place.

This illustrates a problem with government contracting processes in general and explains why it has ramifications beyond those with Indian tribes (it is estimated that the federal government will owe Indian tribes over $1 billion as a result of this decision). The fact is that one branch of government- the Executive (specifically the Interior Department here)- is attaching a dollar sign to a contract before another branch- the Legislative- has even appropriated the funds or, in some cases, inadequate funds. As the majority stated, through its author, Justice Sotomayor, the rules are now clearer with respect to government contractors and they can now enter into contracts knowing they will be paid as promised without charging “non-payment premiums” to the government should the funds not become available. The dissent- a strange alignment of Roberts, Alito, Breyer, and Ginsburg- relied heavily on the “subject to the availability of appropriations” language in the law. In effect, this was a victory for the rule of contracts with respect to the federal government.

Both these cases originated during the Bush Administration. So did the third, technically, but the Obama Administration’s input added impetus to the arguments. The third case, also a 5-4 decision, was Christopher v. SmithKlineBeecham, a pharmaceutical company. Christopher was a pharmaceutical sales representative (PSR)- one of those annoying people who hold up your scheduled doctor’s appointment. Since Pharma began using these people in the 1950s they have been treated as salesmen. Under the Fair Labor Standards Act, salesmen are specifically exempt from the overtime provisions. Christopher argued that he was not, in fact, a salesman under the traditional definition, and that he was entitled to overtime and back pay. A decision in his favor would cost billions of dollars to the pharmaceutical industry in back and overtime pay.

For about 70 years, the definition of “outside salesman” has been left up to the Department of Labor to define. They are required to update job definitions as situations change. Salesmen are exempt because their duties cannot be easily quantified within set time periods. Hence, there can be no standards to be “fair” as the law’s name suggests. In fact, the definition was slightly altered under the Bush Administration, yet the gist of it remained unchanged. There have been three changes since the FLSA was first passed in the 1930s under both Republican and Democratic Presidents, yet there was this long-term acceptance of the fact that outside sales representatives were, in fact, salesmen in the traditional sense and thus exempt.

Along comes Obama’s Labor Department which unilaterally decides not through normal channels and procedures, but through amicus briefs in court, that since the PSR does not actually sell the doctor they visit drugs (pharmacies sell drugs), they are not salesmen and are therefore entitled to overtime pay. In other words, since no tangible property was transferred- at most, only a promise by the physician they would prescribe the drug- they could not be salesmen. The majority rejected that line of thought citing that the actual transfer of property need not occur for it to be a sale, that the Labor Department was attempting to change the rule without going through the normal procedures, and that an almost 70-year silence on the issue by the Labor Department despite numerous opportunities left them no choice but to determine that PSRs were, in fact, salesmen and not entitled to overtime pay. They added a technicality- even if the Obama Administration prevailed here, the petitioners were PSRs in 2004 and Obama’s first attempt- an amicus brief- occurred in 2009. Hence, the definition as understood in 2004 would preclude overtime pay.

Here, the traditional ideological alignment held with Roberts, Alito, Scalia, Kennedy and Thomas in the majority. Breyer’s dissent centered around the transfer of tangible property argument. It would seem strange that such an issue would even reach the Supreme Court, but it also illustrates the complexity of these laws, the Congressional grants of power given to agencies of the Executive Department, and the fact that laws drafted and enacted in a by-gone era still are sources of litigation today. Personally, in all three cases, I believe the Supreme Court got it right. One my best friends is a pharmaceutical sales representative and he said it best: everyone knows the rules when they take the job and have no excuse to claim overtime after the fact. It also illustrates the arrogance- which was on full display Friday with his immigration non-enforcement of the law decision- of the Obama Administration. Once again, thankfully, we have the Supreme Court to do what voters need to do in November, 2012- smack down this president.

[Special note: Although hard to read Court tea leaves, they recently held over for consideration a case against HHS involving Obamacare, Medicaid, and reimbursement schedules. Sometimes when a case is held over in conference, it is because there is a pending case before the Court that would resolve the issue in the new case. IF that is true here, it would appear there is a greater than 50/50 chance that the ACA will be struck down in whole or part. If they don't go that route, further litigation may serve to eat away at parts of Obamacare should the Court actually take the case. Keep your fingers crossed- next week the decision is coming!!!]

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