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Community Rights Report Newsletter -
2004 Feature Case Archive



DECEMBER 2004

High Court to Decide If Takings Claimants Can Get "Second Bite" in Federal Court
San Remo Hotel v. San Francisco (U.S. No. 04-340)

On December 10, the U.S. Supreme Court turned an already significant takings term into a potential blockbuster by agreeing to hear San Remo Hotel v. San Francisco. The case raises the issue of whether takings claimants are entitled to a second bite at the apple in federal court on the same factual and legal issues they lost on in state court.

Now in its 11th year of litigation, San Remo is a takings challenge to a San Francisco ordinance designed to alleviate the city's severe affordable housing shortage by restricting the conversion of "residential hotels" to tourist use. Hotel operators converting rooms to tourist use are required to pay a mitigation fee to the city to help fund replacement units. San Remo first filed in federal court, but then asked the court to abstain from the case and voluntarily proceeded to state court. When it litigated its state law takings claim in state court, it expressly "reserved" its federal takings claim for future litigation. The state court case ended in 2001 when the California Supreme Court upheld the ordinance and broadly affirmed the right of governments to impose legislative impact fees.

San Remo then refiled in federal court to pursue a federal takings claim. The federal district court rejected the federal claim on grounds of issue preclusion. On appeal, the Ninth Circuit held that while a litigant may use a reservation to protect against claim preclusion, issue preclusion remains a bar to relitigating in federal court the specific issues already decided in state court. Because the California state courts already decided the factual and legal issues that governed San Remo's federal takings claim, issue preclusion barred relitigation. The court's decision was a strong rebuttal to the notion that taking claimants deserve a second bite at the apple in federal court.

Under the Full Faith and Credit Act, one of the oldest provisions in the federal code, federal courts are required to give the same preclusive effect to a state court judgment as another state would give. As the Court held in Allen v. McCurry, 449 U.S. 90 (1980), federal claimants do not possess an unencumbered right to litigate their claims in federal court. If the Supreme Court follows past precedent, issue preclusion should prevent San Remo from challenging the state judgment in federal court.

The San Remo case harkens back to the federal legislation pushed by the developers' lobby that attempted to repeal the Williamson County requirement that claimants challenging state or local action first seek relief in state court before bringing a takings claim in federal court. Although these developer-supported bills failed to win passage in two successive Congresses in the wake of strong opposition from state and local governments, the developers' lobby is pushing cases like San Remo to advance a similar agenda in the courts.


NOVEMBER 2004

Listening to the States in Shaping "Our Federalism"

In January, CRC announced its expanded focus on a broader range of constitutional threats to health, safety, and environmental safeguards. As Community Rights Report readers now know, CRC is no longer only about takings. We also assist in defending against preemption challenges to state and local protections, as well as challenges under the Commerce Clause to federal protections that provide minimum safeguards for all communities. Now we're delighted to announce a new book co-authored by CRC, Redefining Federalism: Listening to the States in Shaping "Our Federalism," published this month by the Environmental Law Institute, which explains the unifying vision behind this expanded focus.

The book provides the first comprehensive analysis of the briefs filed by state attorneys general in federalism cases over the past decade. These briefs tell a compelling story about what the States believe federalism is, and is not. The Supreme Court, according to the States, is protecting federalism too much and too little. Too much, by striking down federal law where even the States recognize that a federal role is necessary to address a national problem, and too little, by inappropriately limiting state experimentation.

For example, in United States v. Morrison, (U.S. 2000), the Court struck down important portions of the federal Violence Against Women Act over the strong objections of 36 state attorneys general, leading Justice Souter to quip in dissent that it is "not the least irony of these cases that the States will be forced to enjoy the new federalism whether they want it or not."

The States have also been clamoring for the Court to reconsider its standard for determining when a federal law preempts state and local governments from legislating on the same subject. The States have asked the Court to find preemption only when Congress says explicitly that it wants to eliminate state policymaking. The Court has often turned a deaf ear to these requests.

In sum, the States are asking the Supreme Court to redefine federalism. Federalism as explained by the States is not a zero sum game in which every expansion of the national government's power is an intrusion into the power of the States. Federalism instead is about allocating government power in a manner that improves the way government serves its citizens.

If federalism is about protecting the States, the Court should listen to them. Redefining Federalism can be ordered at www.eli.org.


 

OCTOBER 2004

Eminent Domain, Imminent Decision

The U.S. Supreme Court has agreed to revisit the issue of eminent domain, granting cert. in Kelo v. City of New London, No. 04-108. A ruling against New London could dramatically curtail the ability of local governments to revitalize distressed cities.

The Fifth Amendment allows a government to compel a reluctant landowner to sell private property, but only for "public use." Common public uses include roads, parks, schools, and blight clearance. Some governments have used the power more broadly, however, and the Supreme Court has previously allowed non-blighted property to be condemned and transferred to another private owner if a state or local legislature reasonably deems that transfer to be for public use.

The Kelo case arose out of the dire economic condition of New London, Connecticut in the late 1990s. The city's unemployment rate was almost double that of the state, it had been losing residents for three decades, a major employer had left the town in 1996, and the local tax base was anemic. When the Pfizer corporation decided to locate a major facility in New London, local officials planned to turn an adjacent waterfront neighborhood into a site for a hotel, health club, condominiums, office towers, parking facilities, and a public river walk that it hoped would create jobs, generate more tax revenues, energize the city economically, and encourage New Londoners to enjoy the river as a public amenity.

The city sought to condemn homes in the Fort Trumbull neighborhood to clear the way for this new project. A handful of the affected homeowners objected, saying that a greatly increased tax base and more than a thousand new jobs were insufficient to clear the Constitution's public use hurdle. The Connecticut Supreme Court sided with New London, 843 A.2d 500 (Conn. 2004), and the homeowners petitioned the U.S. Supreme Court for review.

Eminent domain has played a crucial role in major waterfront redevelopments, ballpark construction plans, and neighborhood revitalization. If the Court backtracks on the scope of eminent domain, state and local officials will lose a key economic development tool. Worse, residents of many distressed cities will be less likely to enjoy the benefits-like new jobs, better services, and more amenities-that arise out of the careful, intelligent use of eminent domain. Expect a decision next spring.


SEPTEMBER 2004

Dormant Commerce Clause Ruling Topples Tax Incentives
Tax Credits Unconstitutional, but Tax Exemptions Okay in Sixth Circuit

Justice Scalia has called the Court's jurisprudence under the dormant Commerce Clause a "quagmire." His point is illustrated well by the Sixth Circuit's recent ruling in Cuno v. DaimlerChrysler, Inc., 2004 Fed. App. 0293P (6th Cir.). In Cuno, the court overturned the state of Ohio's investment tax credit, which protected Ohio jobs by giving companies that installed new machinery in their Ohio operations a credit against the state's corporate franchise tax. The court held that the tax credit violated the dormant Commerce Clause by discriminating against out-of-state commerce. But the court upheld the state's personal property tax exemption, which applies to companies that create or expand facilities in distressed areas in the state. Yet this exemption would also seem to discriminate against interstate commerce since it too applies only to investment in Ohio.

Ohio's investment tax credit was designed to encourage unusually expensive capital investments in its communities. The Sixth Circuit found that this tax credit looked like other tax schemes that the Supreme Court has invalidated in the past. The Sixth Circuit ruled that not extending the tax credit to out-of-state equipment installations was tantamount to discrimination against interstate commerce.

However, the court upheld Ohio's personal property tax exemption scheme, which allows municipalities to waive personal property taxes for companies that invest in Ohio's enterprise zones and maintain their level of employment there. The court explained that the tax exemption "contains no restriction on the individuals employed or served," meaning, presumably, that if Kentucky residents were employed in and Michigan residents shopped in these depressed areas (which seems unlikely), the Ohio investors received the exemption anyway.

To the Sixth Circuit, the difference between a tax credit and tax exemption was crucial. "Unlike an investment tax credit that reduces pre-existing income tax liability, the personal property exemption … merely allows a taxpayer to avoid tax liability for new personal property put into first use in conjunction with a qualified new investment." The court concluded that, in the case of exemptions, "businesses that desire to expand are neither discriminated against nor pressured into investing in Ohio," and thus found no dormant Commerce Clause violation. But is the difference really that clear? If a business can get a 100 percent personal property tax exemption in an Ohio enterprise zone, but no exemption in, say, Illinois, won't that business be more likely to locate in the Ohio enterprise zone? How, exactly, is this situation different from the disallowed corporate franchise tax credit, which also sought to encourage investment in Ohio rather than Illinois or elsewhere?

These fine distinctions between tax credits and tax exemptions make it hard for state and local officials to craft future tax policies. Until the Supreme Court clarifies its dormant Commerce Clause jurisprudence, expect this judicial hair-splitting to continue.


AUGUST 2004

Federal Statutes as Background Principles

One key question raised by the 1992 Lucas ruling is whether the "background principles" that immunize government officials from takings liability include federal law (not just state law) and statutes (not just common law). Some in the so-called property rights movement have insisted that the background principles defense is limited to state common law. Others have argued that the defense is broader and may encompass statutes and federal law in appropriate circumstances.

The Federal Circuit applied the broader view in American Pelagic Fishing Co. v. United States, No. 03-5101 (Fed. Cir. Aug. 16, 2004), overturning a $37 million takings verdict handed down by the U.S. Court of Federal Claims. American Pelagic alleged that riders to appropriations bills worked a taking because they cancelled its federal permits to fish for mackerel and herring in the "Exclusive Economic Zone" (EEZ) in the Atlantic Ocean, which extends 200 nautical miles from the U.S. coast.

The appeals court made short work of the claimant's allegation that the riders effected a taking of the fishing permits themselves, ruling that no one can possess a property right in these permits because the government retains the right to revoke them. Turning to American Pelagic's main contention - that the riders took the use of the vessel for fishing in the EEZ - the court stated that the issue reduced to whether the right to fish in the EEZ is "a legally cognizable property interest such that it was a stick in the bundle of property rights that American Pelagic acquired" when it purchased the vessel. American Pelagic argued that it was, because the use of the vessel to fish was allowed not only under traditional property and nuisance law, but also the federal regulatory regime under which the permits were issued.

The Federal Circuit disagreed. The court first reaffirmed the important principle set forth in Lucas that owners of personal property have less of an expectation to be free from regulation than landowners, in view of the high degree of government control over commercial dealings involving personal property. It then concluded that background principles of federal law prevented American Pelagic from acquiring the right to fish in the EEZ when it bought the vessel. Specifically, it ruled that through the 1976 Magnuson Act, a 1983 proclamation by President Reagan, and 1986 amendments to the Act, the United States asserted sovereignty over the natural resources of the EEZ. Because these laws were in place when American Pelagic purchased its vessel, the court concluded that they served as background principles that inhered in the vessel's title and precluded takings liability for any subsequent restriction on EEZ fishing.

Congrats to U.S. DOJ, the Maine Attorney General's Office, which filed an amicus brief on behalf of several States, and our friends at the Georgetown Environmental Law & Policy Institute, which represented amici Oceana and Ocean Conservancy.


JULY 2004

Federal Circuit Renders Split Decision In Salmonella Case
Rose Acre Farms, Inc. v. U.S., No. 03-5103 (Fed. Cir. June 30, 2004)

The good news is that on June 30, the Federal Circuit reversed a dreadful ruling by the U.S. Court of Federal Claims, which had held that federal efforts to address salmonella poisoning had worked a taking. The bad news is that the appeals court's ruling is a total hodgepodge that muddies the water on whether loss of profits is an appropriate measure of a taking under Penn Central.

The key issue raised by the Rose Acre case is whether taxpayers must compensate Rose Acre Farms for food safety protections imposed after three Salmonella outbreaks traced back to its eggs caused nearly 500 people to become ill and 150 people to be hospitalized. The U.S. Department of Agriculture temporarily banned Rose Acre from selling eggs from Salmonella-contaminated hen houses as table eggs, but it still permitted those eggs to be sold in the less lucrative breaker market (e.g., for cake mix) because the pasteurization process used on breaker eggs kills the deadly bacteria.

The trial court ruled a taking of the eggs occurred based on a value loss ranging from 10-25% (depending on parcel definition), contravening decades of established precedent showing that government action must work a severe value loss, typically in excess of 90%, to constitute a taking. Just as disturbing, the trial court based its holding in part on its second-guessing of the wisdom of the challenged government restrictions, which the trial judge deemed "misguided," even though Rose Acre had lost a challenge to those restrictions in the Seventh Circuit, where it argued unsuccessfully that the government response was arbitrary.

On appeal, the Federal Circuit held that the lower court's analysis of Penn Central's economic impact prong failed to gauge the specific impact of the regulations on Rose Acre. The appeals court also ruled that the trial court improperly concluded that the regulations were misguided. The Federal Circuit also rejected the trial court's conclusion that the killing and testing of various Rose Acre hens worked a per se taking.

In a troubling portion of the analysis, however, the Federal Circuit held that on remand, the trial court must decide whether loss of profit is a more appropriate measure of the takings claim than loss of value. The court disregarded the obvious fact that using lost profits as a benchmark for takings liability would reward inefficient, marginal firms that were operating just above the breakeven point prior to the challenged government action. Amazingly, the court's bizarre calculations suggest that going from a $1 profit to a $5 loss would constitute a 600% loss in profits, while dropping from a $12 profit to a $6 profit (the same $6 loss in absolute terms) would constitute just a 50% loss. The court also ignored the absence of any guidance in 80+ years of regulatory takings jurisprudence on how a court should evaluate a loss in profits as compared to a lesser loss in value. We are hopeful the trial court will ultimately apply the well-accepted value loss approach on remand.

Community Rights Counsel filed an amicus brief with the Federal Circuit in the case on behalf of several public health and consumer groups.


JUNE 2004

Under Odd Parcel Definition, City Quarry Ban Might Work a Taking
Vulcan Materials Co. v. City of Tehuacana, 369 F.3d 882 (5th Cir. May 21, 2004)

In an unusual decision, the Fifth Circuit reversed a district court opinion to hold that an ordinance banning limestone quarries within city limits would work a categorical taking under the Texas Constitution, unless the quarrying is deemed to be a nuisance. The ruling is especially disturbing because the ban applies only to 48 of the claimant's 298-acre parcel.

The City of Tehuacana, Texas boasts a population of just over 300. It passed an ordinance in 1998 that forbids certain mining activities within city limits due to property damage, dust, smoke, and loss of springs and water wells caused by quarry blasting. Vulcan Materials held mineral leases on 48 acres within the city limits and on an additional 250 acres of adjacent land beyond the city's borders unaffected by the law. On motion for summary judgment, the district court rejected Vulcan's multi-million dollar takings challenge to the restrictions on its 48 acres because it held the activities constitute a nuisance under Texas law and Vulcan did not suffer a complete loss of value. The court noted that Vulcan owned other property and could still theoretically extract limestone from the tract without blasting, although such means were more labor intensive and expensive.

Rejecting this analysis, the Fifth Circuit attempted to determine how the Texas Supreme Court would rule and held that property beyond the reach of the regulating body's jurisdiction should not be considered part of the relevant parcel. Defining the relevant parcel as only the 48 acres within the city limits, the court found that the ordinance effectively prohibits all mining on the parcel and held that it would work a categorical taking of Vulcan's mineral rights unless the mining was a nuisance. The court remanded to the district court for a trial on whether quarrying within city limits could be considered a nuisance.

Because the court makes numerous "Erie guesses" as to what the Texas Supreme Court would hold, the Fifth Circuit noted that its ruling "is likely to have limited precedential value." Nonetheless, the court's segmentation analysis is troubling, and it will be interesting to see how the background principles question is ultimately resolved.


MAY 2004

Town of Flower Mound v. Stafford Estates Ltd. P'ship, 2004 WL 1048331 (Tex., May 7, 2004)

The Texas Supreme Court dealt municipalities in the state a setback this month when it affirmed a lower court decision holding that a development condition worked a taking under the Texas Constitution. In so doing, the court ruled that the Nollan/Dolan essential nexus and rough proportionality tests extend to conditions outside the context of dedicatory exactions.

The Town of Flower Mound requires that subdivision developers improve abutting streets that fall below current road standards. Accordingly, the town required Stafford Estates to rebuild an abutting road as a condition of receiving approval to construct a new subdivision. Stafford reconstructed the road and sued for a taking.

Although Del Monte Dunes and most state court decisions appear to limit rough proportionality analysis to compelled dedications of land, the court rejected the Town's argument that the Nollan/Dolan test is inapposite to other kinds of exactions. "In neither Dolan nor Del Monte Dunes did the Supreme Court have reason to differentiate between dedicatory and non-dedicatory exactions," the court concluded. Relying heavily on the California case Ehrlich v. City of Culver City, the court reasoned that the development condition at issue was more like a dedication than a mere restriction on the use of property and that therefore the Nollan/Dolan test should apply.

The court also parted company with the majority of state courts, which have limited application of the Dolan standard to adjudicative determinations. While the court did "not decide what 'legislative' decisions are to be judged by the Dolan standard," it concluded that "the condition that the Town imposed on Stafford must be." Because the road was in good shape at the time and the Town failed to demonstrate a proportional relationship between the development and the required improvements, the court affirmed the ruling for the developer. Lastly, the court rejected Stafford's claim for attorneys' fees under 42 U.S.C. § 1988, holding pursuant to Williamson County that since adequate state remedies were available, the company could not maintain a federal claim that would entitle it to a fee award.



APRIL 2004

Ninth Circuit Rejects Takings Claim in San Remo But Revives "Substantially Advance" Test in Chevron
San Remo Hotel L.P. v. San Francisco City & County, 2004 WL 785322 (9th Cir. April 14, 2004)
Chevron USA, Inc. v. Lingle, 2004 WL 720175 (9th Cir. April 1, 2004)

Two rulings from the Ninth Circuit this month are a decidedly mixed bag. Two weeks ago, the court gave San Francisco attorneys a key victory in their long-running battle to defend the city's hotel conversion ordinance against a takings challenge. But just two weeks earlier, the court second-guessed government officials by ruling 2-1 that a Hawaii rent-control statute aimed at gas stations worked a taking because it did not substantially advance the state's interest in reducing gas prices to consumers.

At issue in San Remo was whether the hotel could relitigate a takings claim in federal court after a nearly identical claim had already been raised and rejected in state court. Although San Remo attempted to "reserve" its federal claim in state court, the Ninth Circuit ruled that a litigant could use a reservation to protect only against claim preclusion. Issue preclusion remains a bar to relitigating in federal court specific issues already decided in state court. The court thus issued a strong rebuttal to the notion that claimants deserve two bites at the takings apple. Kudos to San Francisco attorney Andrew Schwartz for an excellent brief and argument. CRC filed a supporting amicus brief on behalf of several municipal groups.

The Chevron case addressed a Hawaii law that regulates the maximum rent an oil company can charge its dealer stations. Chevron alleged that the statute failed to substantially advance a legitimate state interest, and a district court granted summary judgment for the company in 1998. The Ninth Circuit agreed with the standard but remanded for further factual determinations. After the district court again ruled for Chevron based on its finding that the legislation did not advance the purpose of limiting gasoline prices in the state, Hawaii argued (among other things) that the decision was contrary to Eastern Enterprises, a case in which five justices appeared to cast doubt on the viability of means-ends inquiries under the Takings Clause. But the Ninth Circuit reaffirmed its prior holding that the "substantially advance" test calls for intermediate scrutiny and "requires a 'reasonable relationship' between a legitimate public purpose and the means used to effect that purpose."

Chevron breathes new life into a test that courts have rarely employed to find a taking outside the context of compelled dedications of land. Given that seven Justices have joined opinions in recent years raising questions about the validity of the test, the issue calls out for clarification by the U.S. Supreme Court.


MARCH 2004

Big Win in Texas Supreme Court: Clarity from the "Serbonian Bog"

The Texas Supreme Court once described the state of regulatory takings jurisprudence as "a sophistic Miltonian Serbonian Bog" that could swallow up even the most careful navigator. But earlier this month, in Sheffield Devel. Co. v. City of Glenn Heights, No. 02-0033 (Tex., March 5, 2004), the court identified some firm islands of clarity in the bog by unanimously rejecting takings challenges to municipal downzoning and a related twelve-month moratorium.

The case arose out of a 1998 decision by the City of Glenn Heights, a small suburb south of Dallas, to rezone a 194-acre tract from (roughly) 1/6-acre to 1/4-acre lots. Sheffield challenged the rezoning and related moratorium as takings under the Texas Constitution.

The trial court ruled that the downzoning worked a taking, and a jury awarded Sheffield $485,000 plus interest, a potentially devastating amount for Glenn Heights, whose population was just 8,050 as of 2000. The trial court rejected the takings challenge to the moratorium. An intermediate appeals court affirmed the takings award for the downzoning, and also concluded that the moratorium worked a taking and remanded for additional compensation on that claim. In one of the most expansive readings of a state Takings Clause ever rendered, the appeals court ruled that a 38 percent loss in value could work a taking, even though the land was still worth more than four times what Sheffield had paid for it.

The Texas Supreme Court reversed both takings rulings. The state high court concluded that the rezoning advanced the government's legitimate interest in curbing the ill effects of urbanization. The court then applied Penn Central's multifactor test, assuming (based on the jury award) that the rezoning reduced the value of the land by 50 percent. While recognizing that this value loss is significant, the court stressed that it is "more important" to the takings analysis that the land was still worth four times what Sheffield paid for it just a few years ago. The court concluded that while certain aspects of the City's conduct were "troubling," the City's decisions "were not materially different from zoning decisions made by cities everyday." Turning to the moratorium, the court asserted that a municipality may not use delay merely to extract concessions, but concluded that the moratorium here facilitated an orderly process for resolving various disputes over zoning within the city.

Kudos to Robert F. Brown of Brown & Hofmeister, LLP for securing this victory for Glenn Heights. The court received numerous amicus briefs in the case, including briefs CRC prepared at the petition stage and on the merits on behalf of the Texas Municipal League, Texas City Attorney Association, and International Municipal Lawyers Association.

The opinion is available at: http://www.supreme.courts.state.tx.us/historical/2004/mar/020033.htm.


FEBRUARY 2004

Court Awards $14 Million in ESA Takings Case

Although habitat protection under the Endangered Species Act has sparked much controversy over the years, landowners alleging regulatory takings under the Act have met with little success-until now. On December 31, the U.S. Court of Federal Claims awarded water users in the Tulare Lake Basin of California $14 million plus interest in a takings challenge to efforts by state and federal officials to protect the winter-run chinook salmon and delta smelt, two species of fish considered in danger of extinction. Tulare Lake Basin Water Storage Dist. v. United States, 2003 WL 23111365 (Fed. Cl. Dec. 31, 2003). The damage award follows the court's previous decision finding a physical taking of the farmers' water rights, which we discussed in our first issue of Takings Watch in May 2001.

At the center of the litigation are two projects that transport water from northern California for farm irrigation in the southern portion of the state. Although the government did not consumptively use the water at issue, but instead only restricted the farmers' use, the court ruled that the government had "seized" the water. The court thus sidestepped a Penn Central analysis to find a physical taking, while also rejecting arguments that several background principles of state law, including the public trust and reasonable use doctrines, that deprive the claimants of any right to use the public's water in a way that injures wildlife.

The government has not yet decided to appeal the case, which is the first significant decision holding that protections under the Endangered Species Act constitute a taking. If the decision stands, the government could also face up to $1 billion in liability for a claim over similar water restrictions in the Klamath Basin in Oregon and Northern California that were aimed at maintaining lake levels for two endangered species of sucker fish. "It does potentially set a very expensive precedent for the federal government," University of California Berkeley law professor Joseph Sax told the LA Times. See http://www.redding.com/news/state/past/
20040129state065.shtml
.

Expansion of the court's disturbing physical takings analysis beyond the context of water rights could also have troubling implications for workaday land-use protections. We plan to file a brief next month in Stearns Co., Ltd. v. United States, a similar CFC case holding that federal permitting regulations worked a physical taking of a mining company's right to mine in a National Forest.


JANUARY 2004

Aetna Health Inc. v. Davila (U.S. Nos. 02-1845 & 03-83)

When HMO cost-cutting is hazardous to your health, may state legislatures and state courts do anything to protect you?

Juan Davila, a post-polio patient with diabetes and arthritis, received Aetna HMO coverage through his employer's health plan. To address his arthritis pain, his doctor prescribed Vioxx, which has a lower rate of bleeding, ulceration, and similar toxic effects than other pain relievers. But before filling the prescription, Aetna required Davila to try two different, cheaper medications. After three weeks, he was rushed to the emergency room with bleeding ulcers, which caused a near heart attack.

Ruby Calad underwent a complicated hysterectomy. Although her doctor recommended a longer stay, CIGNA's hospital discharge nurse decided that the standard, one-day hospital stay would suffice. Calad suffered serious complications, which she attributes to her early release.

Davila and Calad sued their HMOs for consequential damages in state court under a Texas statute that allows patients to challenge negligent medical decisions by HMOs. Aetna and CIGNA argue that the state statute is preempted by ERISA, the Employee Retirement Income Security Act, which does not allow ERISA plan beneficiaries to recover consequential damages. Worse still, they argue that the claims are not only preempted, but "completely preempted," and that therefore the cases should be removed from state court to federal court, even though the complaints plead only state law claims.

There are few indignities greater for a state court than to have a case snatched from its docket through complete preemption, which negates any previous investment of resources and precludes it from voicing any view whatsoever on the state law claims or the propriety of removal. On January 22, Community Rights Counsel submitted an amicus brief to the Supreme Court in support of Davila and Calad, demonstrating that complete preemption is improper here because the state-law claims are independent from, and do not require application of, ERISA or any ERISA plan. The brief is available at http://www.communityrights.org/PDFs/Briefs/Davila.pdf. Oral argument will be held March 23, and a ruling is expected before the Court's summer recess.


 

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